# Petition — Noble v. McClatchy Newspapers > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_0471%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1977 - **Citation:** 433 U.S. 908 ## Text Ocroser Term, 1976 No. 76 24 2 Wrarp M. Nosiz and Erra M. Noszz, Cross-Petitioners, vs. McCiatcHy NEWSPAPERS, a corporation; ELEANOR Mc- CLatTcnry, an individual ; Waurer P. Jones, an indi- vidual; C. K. McCriatcry, an individual; Byron ConxKLin, an individtal; Carto Bua, an individual, Cross-Respondents. for the Ninth Circuit G. JosupH BERTAIN, JR., Trmorny H. Fre, 50 California Street, Suite 955, San Francisco, Californie 94111, Telephone: (415) 981-4938, Attorneys for Cross-Petitioners. Page EE GE ded vnnewcddeddedtndcecedeoecccasecccenkes 2 EE etic dads ekedaddaceadnesediuadsnesetediees 2 ED ic ccocccccncnceddséuecesucsedbeesdanse 2 EE bi LU ae che kesuttenuedbddeeenecoseecess 3 Section 4 of the Clayton Act, 15 U.S.C. §15 .......... 3 Section 16 of the Clayton Act, 15 U.S.C. § 26 ......... 4 Section 1 of the Sherman Act, 15 U.S.C. §1 .......... 5 EE EO Re A OE 5 Reasons for granting the writ ............c.ceceeeeeeeees 15 PE inedidsuebisetbeevadessteadebsaredssieedeceeds 24 Table of Authorities Cited Cases Pages Alpha Distributing Co. v. Jack Daniel Distillery, 454 F.2d Ge ED ebdadecdesensdecccctcnccccencéeceneste 17 Bigelow v. RKO Radio Pictures, Irv., 327 U.S. 251 ...... 19, 20 Chicago Board of Trade v. United States, 246 U.S. 231 ... 16 Federal Trade Comm’n v. Texaco, Inc., 393 U.S. 223 ...... 17,18 Perma Life Mufflers, Inc. v. Intl Parts Corp., 392 U.S. 134 22 Northern Pac. Ry. Co. v. United States, 356 U.S. 1 ...... 16 Standard Oil Co. of New Jersey v. United States, 221U.S.1 15 Story Parchment Co. v. Paterson Parchment Paper Co., 282 Te GEE cccncdeceseccecaseseneusapateensedeecsonsens 19, 20 Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. i scshencustssdsdekeamadeeuadneuesenseneseusssiese 20 ii Tape or AutTHorities CITep Codes Pages Evidence Code, Section 452(d) ........ccccecccccecceces 23 Statutes Clayton Act: Section 4 (15 U.S.C. Section 15) ............ 3, 4, 13, 15, 21 Section 16 (15 U.S.C. Section 26) ................. 3, 4, 12 Sherman Act: Section 1 (15 U.S.C. Section 1) ................ 3, 5,14, 15 ee nr ae 2 Other Authorities FTC Staff Report of Ad Hoe Committee on Franchising, submitted to the Federal Trade Commission, June 2, 1964, Dr TD idcdccsnncdudeaeuiessscdsavasscdeectatevectiaes 24 Franchising in the Economy 1974-1976, United States Department of Commerce/Domestic and International Business Administration/Bureau of Domestic Commerce 23 In the Supreme Court Bnited States OcToBER TERM, 1976 No. WIarp M. Nosie and Erra M. NosLg, Cross-Petitioners, vs. McCuiatcHy NEWSPAPERS, a corporation; ELEANOR Mc- CLATCHY, an individual ; WALTER P. JONEs, an indi- vidual; C. K. McCuiatcHy, an individual; Byron ConKLIN, an individual; Carto Bua, an individual, Cross-Respondents. CROSS-PETITION FOR WRIT OF CERTIORARI to the United States Court of Appeals for the Ninth Circuit Cross-petitioners pray that a writ of certiorari issue to review the judgment and opinion of the United States Court of Appeals for the Ninth Circuit entered in this proceeding on November 14, 1975. 2 OPINION BELOW The opinion of the Court of Appealsis officially re- ported at 533 F.2d 1081. It appears is Appendix A to the Petition for Writ of Certioran filed by peti- tioners in McClatchy Newspapers, et ai v. Willard M. | Noble, et al., No. 76-86 in the Suprene Court of the United States (October Term, 1976). No opinion was rendered by the District Court for the Northern Dis- trict of California. JURISDICTION The judgment of the Court of Aopeals for the Ninth Circuit was entered on Novemler 14, 1975. A timely petition for rehearing filed by cross-petitioners herein was denied May 20, 1976. 533 T.2d 1081. This cross-petition for certiorari was filed within 90 days of May 20, 1976. The jurisdiction of tiis Court is in- voked under 28 U.S.C. Section 1254(1). QUESTIONS PRESENTED This cross-petition involves a distribution system which permits the distributors to transfer and sell their businesses to another party for valuable con- sideration so long as the distributois are in good standing and their distribution agreenents have not been terminated. However, if the manufacturer ter- minates the distribution agreement, vith or without cause, the right to sell the business is bst and the dis- 3 tributor forfeits his equity interest and good will in his business, The questions presented here are: 1. Does a distributor suffer damages when he is prevented from selling his business under a sale of business restriction which has been found by the jury to be an unreasonable restraint of interstate trade and commerce under Section 1 of the Sherman Act, 15 U.S.C. §1, based upon a rule of reason analysis? 2. Should the judgment of the District Court in favor of cross-petitioners herein for $63,333.04 be re- instated by this Court against cross-respondents based upon the verdict of the jury, which was upheld by the District Court, that said sale of business restriction constituted an unreasonable restraint of interstate trade and commerce under Section 1 of the Sherman Act, 15 U.S.C. §1, and injured cross-petitioners as a result thereof ? 3. Did the District Court abuse its discretion when it denied cross-petitioners’ request to provide perma- nent equitable relief under Section 16 of the Clayton Act, 15 U.S.C. §26 prohibiting the cross-respondents from continuing to maintain this unreasonable re- straint of trade? STATUTES INVOLVED SECTION 4 OF THE CLAYTON ACT, 15 U.S.C. § 15 Any person who shall be injured in his business or property by reason of anything forbidden in the anti- trust laws may sue therefor in any district court of the United States in the district in which the defend- ant resides or is found or has an agent, without re- 4 spect 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. Oct. 15, 1914, c. 323 §4, 38 Stat. 731; 15 U.S. Code, See. 15. SECTION 16 OF THE CLAYTON ACT, 15 U.S.C. § 26 Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws, including sections 2, 3, 7 and 8 of this title, when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules govern- ing such proceedings, and upon the execution of proper bond against damages for an injunction im- providently granted and a showing that the danger of irreparable loss or damage is immediate, a prelimi- nary injunction may issue: Provided, That nothing herein contained shall be construed to entitle any person, firm, corporation, or association, except the United States, to bring suit in equity for injunctive relief against any common carrier subject to the pro- visions of the Act to regulate commerce, approved February fourth, eighteen hundred and eighty-seven, in respect of any matter subject to the regulation, su- pervision, or other jurisdiction of the Interstate Com- merece Commission. Oct. 15, 1914, ¢. 323 §16, 38 Stat. 737; 15 U.S. Code, Sec. 26. 3 SECTION 1 OF THE SHERMAN AOT, 15 U.8.C. $1 Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or com- merce among the several States, or with foreign na- tions, is hereby declared to be illegal. Every person who shall make any contract or engage in any combi- nation or conspiracy hereby declared to be illegal shall be deemed guilty of a felony and, on conviction thereof, shall be punished by fine not exceeding one million dollars if a corporation, or, if any other per- son, one hundred thousand dollars, or by imprison- ment not exceeding three years, or by both said pun- ishments, in the discretion of the court. July 2, 1890, Chap. 647, See. 1, 26 Stat. 209; August 17, 1937, Chap. 690, Title VIII, 50 Stat. 693; July 7, 1955, Chap. 281, 69 Stat. 282; December 21, 1974, Public Law 93-528, See. 3, 88 Stat. 1708; December 12, 1975, Public Law 94-145 (Antitrust Procedures and Penalties Act), 89 Stat. 801; 15 U.S. Code, See. 1. STATEMENT OF THE CASE! Defendant McClatchy Newspapers is the publisher of the dominant newspaper in the Sacramento, Cali- fornia metropolitan area—The Sacramento Bee. ( Pits. Ex. 46F, RT 659). Like most newspaper publishers 1Cross-petitioners were the plaintiffs in the District Court and will hereinafter be referred to as plaintiffs. Cross-respondents were the defendants in the District Court and will hereinafter be referred to as defendants. RT refers to the Reporter’s Transcript of the trial proceedings; CT refers to the Clerk’s Transcript on appeal to the United States Court of Appeals; and Pits. Ex. refers to plaintiffs’ exhibit admitted in evidence at the trial. 6 throughout the United States McClatchy Newspapers distributes The Sacramento Bee through independent contractors and not employees. The reason for this was explained by plaintiffs’ expert on newspaper dis- tribution, Paul Rothman, who had 55 years’ experi- ence in the newspaper business: “A. Well, a dealer works seven days a week, because it’s his business. His wife usually takes care of his books. If he has a couple of boys they carry a paper route. If it was an employee setup, they would be working five days a week, forty hours a week, and you would have to have one and a third man for each dealership plus the fact that you would have to have a relief man for it, plus the fact that anytime that they worked be- yond that forty hours, and this dealership is prac- tically a twenty-four hour affair, in ease of an emergency, why, you would have to pay all that overtime, plus the fact that you would have to supply trucks, vehicles of all kinds, where the dealership, the dealer takes care of his own trans- portation, plus the fact that you would have to buy or print all your various forms which the dealer either pays for now or buys it himself.” (RT 1562). (Emphasis Added). Distribution of The Sacramento Bee throughout northern California and Nevada is accomplished pur- suant to written contracts with approximately 1,700 minor city carriers, 150 to 200 minor country carriers, 200 country adult distributors and 9 city adult news- stand distributors. As set forth in the city carriers’ contracts, the country carriers’ contracts, the country distributors’ contracts and the city newsstand distribu- 7 tors’ contracts, the entire distribution of The Sacra- mento Bee is laden with virtually all the recognized trade restraints—from resale price fixing,? customer restrictions,* territorial restrictions,‘ exclusive deal- ing,’ to restraints against alienation.* Mr. Paul Rothman testified that the above restraints were common practice in the newspaper industry all over the United States. (RT 1596-98). Defendants’ counsel argued to the jury that the universality of these restraints by publishers throughout the country means “there is no great sinister brooding in Sacra- mento McClatchy Newspapers [sic] that has a lot of erazy and supposedly illegal contracts.” (RT 2251). The city newsstand distributor contracts between McClatchy Newspapers and its 9 adult city newsstand distributors permitted them to sell and transfer their distributorships to a third party for valuable consider- ation provided they gave McClatchy Newspapers sixty days’ advance notice and obtained its consent to the transfer. McClatchy Newspapers agreed that it would not withhold its consent unreasonably. (Pits. Ex. 7, RT 140). Pursuant to this provision city news- stand distributor Gallagher sold Sacramento Bee City 2Para. 2 of Pits. Exs. 21, 22, RT 129; Para. 2 of Pits. Exs. 24, 25, RT 129-30; Para. 7 of Pits. Exs. 27, 28, RT 132, 137. 8Para. 6 of Pits. Exs. 21, 24, RT 129. 4Para. 7 of Pits. Exs. 21, 24, RT 129; Para. 6 of Pits. Exs. 22, 25, RT 129-30. 5Para. 16 of Pits. Exs. 21, 24, RT 129; Para. 15 of Pits. Exs. 22, 25. RT 129-30; Para. 7 of Pits. Exs. 27, 28, RT 132, 137; Para. 6 of Pits. Exs. 1, 6, RT 137, 139; Para. 4 of Pits. Ex. 7, RT 140. 6Para. 5 of Pits. Exs. 21, 22, 24, 25, RT 129-30; Para. 5 of Pits. Exs. 27, 28, RT 132, 137; Para. 10 of Pits. Exs. 1, 6, RT 137, 139; Para. 11 of Pits. Ex. 7, RT 140. 8 Newsstand Distributorship No. 2 to Mr. James Clifton for $6,000.00 with the consent of McClatchy Newspa- pers. (RT 1153-56, 1174-76, Pits. Ex. 18). Under this provision city newsstand distributor Scott Berry sold Sacramento Bee City Newsstand Distributorship No. 3 to Howard R. Hoel for $8,000.00 with the consent of McClatchy Newspapers. (RT 1178-82, 1610-19, Pits. Exs. 14, 14A). However, under the terms of said city newsstand distributor contracts if McClatchy Newspapers termi- nated the contract, with or without cause, the distribu- tor lost his right to sell his business and forfeited his equity interest and good will in the distributorship. (Pits. Ex. 7, RT 140). This contractual arrangement whereby a valuable business may be sold as long as you are in good stand- ing with the manufacturer but is forfeited upon ter- mination by the manufacturer gives the manufacturer enormous leverage over the distributor. According to plaintiffs’ other expert on newspaper circulation prac- tices, these are the means and tools by which the pub- lisher obtains compliance with its wishes. “A. Well, when you’re a dealer and you know that. your livelihood and your investment in a dealership depends upon what management may or may not do, it has a great deal of effect on what you will do when asked to do so. If you know that you can be terminated by just being given a thirty-day notice without any reason for termination other than the fact that it’s in the contract that you ean be terminated and some- thing is asked of you, you’re reluctant not to want 9 to do it. If you protest it and if someone in man- agement should decide to point out, well, we may need to review your rate or we might need to split your area or, gosh, I don’t know if we want to keep on doing business with you, it had a very strong effect.” (RT 1281-82). Witness after witness, subject to this restraint, tes- tified to its effects. City newsstand distributor Galla- gher testified that he follows The Sacramento Bee’s suggested retail prices, that he stays within the bound- aries of his distributorship and that he does not handle any other newspaper than The Sacramento Bee. (RT 1166-67). City newsstand distributor Hoel testified that he sold The Sacramento Bee at all times at its suggested prices, that he does not handle other newspapers, that he stayed within his territorial boundaries and that at the time he was appointed city newsstand distributor for Newsstand No. 3 he reached an understanding with the circulation department of The Sacramento Bee that he would cease his work as a clerk at Stop & Shop Market, which he did. (RT 1183-84). City newsstand distributor Clifton testified that since becoming city newsstand distributor in news- stand No. 2 he has not handled other newspapers, that he has sold The Sacramento Bee at the suggested prices and that he has stayed within his territory. (RT 1177). The other daily newspaper published in Sacra- mento, The Sacramento Union, has a similar restraint except that in the event of a termination of a Sacra- 10 mento Union distributor the publisher pays the dis- tributor $1.00 per subscriber. (R'T 482-84, 1280). Thus, . like The Sacramento Bee, many Sacramento Union distributors in good standing with the publisher have sold their Union distributorships for substantial sums of money with the consent of the publisher. Dewey Jackson, Sacramento Union newsstand distributor in District No. 4 (which was almost the same area as that serviced by plaintiffs for The Sacramento Bee) sold his distributorship for $30,000.00 (RT 1337-49) ; Bond J. Ward, home delivery dealer in District 700, pur- chased his Sacramento Union distributorship effective May 1, 1970, from Howard Lathrop for $18,000.00 cash (RT 1404-06) ; S. William Burchiel, home deliv- ery dealer in District 1700, purchased his Sacramento Union distributorship effective August 1, 1970 from Fred Gardner for $20,000.00 (RT 1414-19, Plts. Ex. 33-A); John E. Smith, home delivery dealer in Dis- trict 1600, sold a portion of his Sacramento Union distributorship consisting of approximately 1,262 cus- tomers to Jack C. Harney effective March 1, 1971 for $20,000.00 (RT 1434-39, Plts. Ex. 41); and Roy Dotson, home delivery dealer in District No. 500, orig- inally purehased his Sacramento Union distributor- ship effective September 1, 1968 from Wallace Kuhl- man for $8,000.00. (RT 1451-53). Notwithstanding the foregoing The Sacramento Union has terminated dealers and paid the terminated dealers $1.00 per cus- tomer pursuant to such terminations. (RT 482-83, 592, 1464-65). The effect of this restraint was brought home by Dick D. Chaney, circulation manager of The Sacra- 11 mento Union, who testified that none of the city home delivery and newsstand dealers for The Sacramento Union handled other newspapers. The plaintiffs in this action were Willard M. Noble and his wife, Etta, city newsstand distributors for The Sacramento Bee in the area referred to as News- stand No. 5 comprising a portion of the counties of Sacramento and Placer in the State of California. They purchased copies of the daily and Sunday edi- tions of The Sacramento Bee newspaper from defend- ant McClatchy Newspapers and resold from them to retail outlets (such as drug and liquor stores, markets, newsstands and motels) and to purchasers from news- paper vending racks located within said territory. Plaintiffs owned various items of equipment and sup- plies necessary for the sale and distribution of The Sacramento Bee in said territory, including two trucks, approximately 150 newspaper vending racks, office equipment and related supplies. At the time Willard Noble commenced the distribution of The Sacramento Bee in October 1960 the circulation of The Sacramento Bee in Newsstand No. 5 was 18,000 dailies per month and 3,000 Sundays per month (less returns). In the last month of plaintiffs’ distribution of The Sacramento Bee (June 1969) the circulation of The Sacramento Bee in Newsstand No. 5 was 72,000 dailies per month and 14,500 Sundays per month (less returns). (Joint Pre-Trial Statement, CT 343-44) Defendant Byron Conklin, circulation manager of The Sacramento Bee, testified that Mr. Noble was one of those individuals who got The Sacramento Bee 12 newspaper in just about the smallest Mama and Papa store (RT 1061-62), that Mr. Noble was recognized as a man with some experience, that he was very circulation conscious (RT 1062), that Mr. Noble worked very hard to service his dealership (RT 1086) and that Mr. Noble “did a hell of a job” for The Saec- ramento Bee. (RT 1116). Notwithstanding plaintiffs’ outstanding performance as newsstand distributors, defendant Conklin notified plaintiffs by letter dated May 27, 1969 of the termina- tion of their city newsstand distributor contract effee- tive July 1, 1969. The reasons for the termination were hotly disputed at the trial court—forming the basis of a separate claim which is the subject of de- fendants’ petition for certiorari to this Court (No. 76- 86). Defendant Carlo Bua, assistant circulation manager of The Sacramento Bee, testified that a few days after plaintiffs received their termination notice, Mr. Conk- lin said to him, “Well, Carlo, now is the best time to split Newsstand 5. Let’s work on a feasible split that we think would be profitable for those concerned and be equitable to each individual independent contractor for that area” (RT 876-77) ; that he suggested to Mr. Conklin that he be given the responsibility for mak- ing the split which was granted (RT 876); that on June 4, 1969, when Mr. Noble visited their offices he and Mr. Conklin informed Mr. Noble that they were splitting his distributorship (RT 873); and that at the close of the meeting he invited Mr. Noble into his office and showed him the map of the city newsstand 13 distributorships and the split of his distributorship along Walnut Avenue. (RT 873-84). Defendant Conklin testified that during his June 4, 1969 meeting with plaintiff Willard Noble, Noble asked him “Why can’t I sell Newsstand No. 5” and “T said that his contract had been terminated as of the first of the following month and he had nothing to sell, that we had other plans.” (RT 1108) Accord- ing to Mr. Conklin the other plans were the splitting of the dealership. (RT 1108-09). Effective July 1, 1969 James and Elizabeth Galla- gher took over distribution of The Sacramento Bee in half of plaintiffs’ former territory and Gary and Judith Downing took over distribution of The Sacra- mento Bee in the other half of plaintiffs’ territory, pursuant to the same form of contract McClatchy Newspapers used with plaintiffs. (Plts. Exs. 10, 12, RT 1097). Approval of the Gallaghers to take over half of plaintiffs’ distributorship was conditioned on their selling Sacramento Bee City Newsstand No. 2. (RT 1093-94). As a result of the foregoing plaintiffs brought an action in the United States District Court for the Northern District of California on June 26, 1969 under Sections 4 and 16 of the Clayton Act, 15 U.S.C. Sec- tions 15, 26 seeking both damages and injunctive re- lief. (CT 1-16). The case went to trial before a jury on November 16, 1971 upon four separate claims. The third claim, known as the sale of business claim, in- volved the restraint that is the subject. matter of this cross-petition. Plaintiffs claimed that McClatchy 14 Newspapers’ distribution system, whereby plaintiffs had the right to sell their business for a valuable con- sideration so long as they were in good standing with the publisher but forfeited that right and the equity value of their business upon termination of their dis- tribution agreement, constituted an unreasonable re- straint of trade in violation of Section 1 of the Sher- man Act, 15 U.S.C. Section 1, under rule of reason analysis. The jury returned a verdict in favor of plaintiffs and against all defendants on claim three, the sale of — business claim, in the sum of $15,000.00. (CT 793) The jury returned a verdict for defendants on all other claims. Judgment was entered in favor of plain- tiffs on the sale of business claim in the amount of $63,333.04—constituting trebled damages in the sum of $45,000.00, attorneys fees in the sum of $13,500.00 and taxable costs in the sum of $4,833.04. (CT 858-59). Plaintiffs’ request for equitable relief to permanently enjoin the unreasonable restraint of trade that formed the basis of claim three was denied. Defendants filed motions to set aside the jury ver- dict on claim three in favor of plaintiffs and against all defendants, and the judgment entered thereon, and to have a judgment entered in favor of defendants or, in the alternative, for a new trial limited to plaintiffs’ third claim. (CT 860-65). On April 10, 1972 the Dis- trict Court denied without opinion defendants’ mo- tions for judgment notwithstanding the verdict. and for a new trial. (CT 958-59). On May 5, 1972, de- fendants filed a notice of appeal. (CT 962-64). On 15 May 15, 1972, plaintiffs filed a notice of cross-appeal. (CT 973-74). The $63,333.04 judgment rendered by the District Court in plaintiffs’ favor on claim three, the sale of business claim, was reversed by the Court of Appeals on the sole ground that plaintiffs suffered no damages as a result of the imposition of the unreasonable re- straint of trade. The Court of Appeals directed the District Court to enter judgment n.o.v. in favor of de- fendants and against plaintiffs on the sale of business claim. Plaintiffs filed a timely petition for rehearing with the Court of Appeals directed solely to that court’s reversal of the sale of business claim. This petition was denied on May 20, 1976. REASONS FOR GRANTING THE WRIT The decision of the Court of Appeals is in conflict with applicable Supreme Court decisions, weakens the effectiveness of the private action pursuant to Section 4 of the Clayton Act as a vital means for enforcing the antitrust policy of the United States and adversely affects tens of thousands of dealers and franchisees throughout the United States, who are subject to this same form of restraint. Claim three, the sale of business claim, alleges a violation of Section 1 of the Sherman Act, 15 U.S.C. §1. Since the case of Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, Section 1 has been con- 16 strued as precluding only those contracts or combina- tions which “unreasonably” restrain competition. While there are certain agreements or practices, such as price fixing, division of markets and tying arrange- ments, which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable, and there- fore illegal per se, Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5, plaintiffs do not contend that claim three alleges a per se violation. Rather, the restraint that is the subject of claim three requires the application of the ‘‘rule of reason” test. The District Court’s instructions on claim three so pro- vided. 533 F.2d, at 1084, fn. 7. In Chicago Board of Trade v. United States, 246 U.S, 231, 238-39, this Court set forth the criteria for determining whether a particular agreement or regulation constituted an “unreasonable” restraint of trade: “But the legality of an agreement or regulation cannot be determined by so simple a test, as whether it restrains competition. Every agree- ment concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy com- petition. To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint. was im- posed; the nature of the restraint and its effect, a te — 17 actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts, This is not because a good intention will save an otherwise objectionable regulation or the reverse; but be- cause knowledge of intent may help the court to interpret facts and to predict consequences.” The rule of reason inquiry is “primarily a factual one”, Alpha Distributing Co. v. Jack Daniel Distil- lery, 454 F.2d 442, 452 (9th Cir.), and pursuant thereto plaintiffs introduced at trial over the course of 5 weeks extensive proof of the history of the sale of business restraint, the implementation of the re- straint, the use of the restraint by other newspapers including The Sacramento Bee’s only competitor, the effect of the restraint on interstate trade and com- merce, other trade restraints which were ancillary to and accompanied this restraint, the purpose of the independent contractor system of distribution, the market position of The Sacramento Bee and the dis- parity in the bargaining power of the parties. The verdict of the jury in favor of plaintiffs on this claim and the denial by the District Court of defendants’ motion that the evidence did not support the verdict clearly establishes that plaintiffs sustained their bur- den of proof that the subject restraint was an un- reasonable restraint of trade. Indeed, the Court of Appeals did not held other- wise. Like the sales commission system for marketing TBA, which the Court found in Federal Trade 18 Comm’n v. Texaco, Inc., 393 U.S. 223, 229 to be “in- hereutly coercive” and adversely affecting competition in the marketing of TBA, the instant restraint is far more coercive on the distributor and franchisee than the sales commission system condemned in Texaco. As a result the restraint herein is far more effective in causing distributors and franchisees to adhere to suggested resale prices, suggested products to han- dle and not handle, and suggested territories to serve and not serve. It is plain common sense that a small businessman, knowing that as long as he is in good standing with his supplier he ean sell his business for its going concern value, but will forfeit that right if he is terminated, with or without cause, will comply with his supplier’s wishes on such vital matters as price, product and territory. The sole ground for the reversal of the judgment of the District Court by the Court of Appeals was that this unreasonable restraint in trade did not cause plaintiffs any damage. The Court of Appeals viewed the injury caused by the violation as the loss to plain- tiffs of the right to sell the distribution rights to the Bee for thirty-odd days, whereas the jury found (and upheld by the District Court) that the damages were the going concern value of plaintiffs’ distributorship. The Court of Appeals thus measured the damages in terms of the value of plaintiffs’ business after impo- sition of the illegal restraint—the refusal of Me- Clatchy Newspapers to allow plaintiffs to sell their business as a going concern te an acceptable pur- chaser. 19 In Bigelow v. RKO Radio Pictures, Ine., 327 US. 251, a treble-damage plaintiff claimed injury from a conspiracy among film distributors to deny him first- run pictures. He offered evidence comparing his prof- its with those of a competing theatre granted first-run showings and also measuring his current profits against those earned when first-run films had been available to him. This Court, reversing the Court of Appeals, found the evidence sufficient to sustain an award of damages, stating: “the jury may make a just and reasonable esti- mate of the damage based on relevant data, and render its verdict accordingly. In such cireum- stances, ‘juries are allowed to act on probable and inferential as well as direct and positive proof.’ Story Parchment Co. v. Paterson Parchment Paper Co., supra 282 U.S. 561-564; Eastman Kodak Co. v. Southern Photo Material Co., su- pra, 273 U.S. 377-379. Any other rule would en- able the wrongdoer to profit by his wrongdoing at the expense of his victim. It would be an in- ducement to make wrongdoing so effective and complete in every case as to preclude any recov- ery, by rendering the measure of damages un- certain. Failure to apply it would mean that the more grievous the wrong done, the less likeli- hood there would be of a recovery.” 327 U.S., at 264-265. Here, plaintiffs followed the same method of proof as in Bigelow—introducing evidence of the sale price and financial operating figures of comparable Sacra- mento Bee and Sacramento Union dealerships which had been sold in arm’s length transactions and which 20 had not been damaged by the restraint. The trial court’s instructions to the jury on the fact of damage and damages followed the teachings of Bigelow, RT 2343-2345. After trial the District Court then re- viewed the evidence and denied defendants’ motion for judgment n.o.v. The decision of the Court of Appeals directing the entry of a judgment n.o.v. for defendants based upon its own finding that plaintiffs suffered no damages from the violation, is contrary to the reviewing fune- tions of an appellate court as well as the teachings of Bigelow and other cases dealing with the standard of proof in treble-damage actions—“their function is not to decide factual issues de novo.” Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 122- 125; Story Parchment Co. v. Paterson Parchment Paper Co., supra at 566-67. The policy basis of the Court of Appeals’ decision denying plaintiffs damages on the sale of business claim was: “Allowing plaintiffs in the present case to re- cover antitrust damages on the sale-of-business claim after losing the termination claim would in effect reverse the well settled law on the antitrust implications of distributorship terminations. Al- lowing plaintiffs to recover on the sale-of-business claim after winning on the termination claim would be to permit duplicative recovery.” 533 F.2d, at 1085, fn. 9. There is no basis for the Court of Appeals’ con- cern that duplicative recovery may occur. The District Court specifically instructed the jury: 21 “In determining damages, you are not to con- cern yourself with whether or not the damages from each claim are cumulative or not. The Court will insure that there will be no overlapping re- coveries. Your function is in respect to each claim of the plaintiffs upon which you find liability by the defendants and injury to the plaintiffs to determine plaintiffs’ actual damages.” RT 2345. To deny plaintiffs the right to challenge a trade restraint as pernicious and anticompetitive as that contained in the sale of business claim, because there are no damages if the termination is lawful, is to tie the sale of business claim to the termination claim. But the jury was specifically “instructed to consider the sale-of-business claim separate and apart from the termination, and ‘irrespective of whether or not the termination of the contract was lawful,’ ” 533 F.2d, at 1085, an instruction apparently meeting with the Court of Appeals’ approval. /d., at fn. 8. Under the Court of Appeals’ rationale there is no conceivable way that plaintiffs could challenge the sale-of-business restraint. While they are dealers in good standing they have not suffered any damages from the restraint since they are free to sell their businesses. If they have been terminated lawfully but denied the right to sell their business as a going con- cern there are no damages according to the Court of Appeals’ decision in this case, And if they have been terminated unlawfully and denied the right to sell their business plaintiffs can recover under the termi- nation claim. The effect of the Court of Appeals’ de- cision is to eviscerate section 4 of the Clayton Act as 22 a vital and necessary means for enforcing the anti- trust policy of the United States. Perma Life Muf- flers, Inc. v. Int’l Parts Corp., 392 U.S. 134, 136. The effectiveness of the section 4 treble-damage suit would be to a great extent nullified if a seller is able to inherently coerce buyers into a combination whereby prices are fixed, dealing is required to be exclusive and areas and customers are confined through the sword of denial of the right to sell one’s business by one who is not in good standing with the seller. This was clearly demonstrated in this case where plaintiffs were not permitted to sell their distributor- ship but the Gallaghers, who could not own and oper- ate two newsstand distributorships according to Mc- Clatchy Newspapers’ policy, were allowed to sell Newsstand No. 2 for $6,000 pursuant to their acquir- ing half of plaintiffs’ distributorship. The effect of the decision of the Court of Appeals was not only to expose McClatchy Newspapers’ city newsstand distributors to cancellation and denial of the right to sell their businesses but, also, tens of thousands of other franchisees and dealers under sim- ilar restraints were also exposed. In fact, the effect of the Court of Appeals’ decision was clearly evi- denced 45 days after its decision was handed down. On December 29, 1975 McClatchy Newspapers noti- fied all of its city newsstand distributors except one of the termination of their contracts effective March 1, 1976. McClatchy Newspapers refused to permit these distributors to sell their businesses and, denied any obligation to compensate them for their businesses 23 even though several had paid substantial sums of money for their businesses with McClatchy News- papers’ consent. One terminated city newsstand dis- tributor (John and Gloria Naify) paid $37,500 for their newsstand distributorship with the consent of McClatchy Newspapers. These facts are all set forth in an antitrust suit filed by 7 of the city newsstand distributors against McClatchy Newspapers on Janu- ary 26, 1976. Civil No. C-76-117 in United States Dis- trict Court for the Northern District of California.’ McClatchy Newspapers’ action, 45 days after the Court of Appeals’ decision in this case was rendered, had the effect of wiping out 9 small businesses having a total market value, prior to said action, in excess of $400,000. The Court of Appeals’ decision in this case will have a substantial and adverse effect on the approxi- mately 374,694 franchised establishments in the United States. These franchisee-owned businesses will do an estimated $163 billion worth of sales in 1976. The aver- age franchisee will do an estimated $435,000 worth of sales in 1976. The total investment and start up eash required for these franchisees in 1974 varied from $26,000 for a rental service equipment franchisee to $850,000 for a motel franchisee. These franchised establishments are controlled by a relatively small number of franchisors—less than 1500. The invest- 7Judicial notice may be taken of the records of this Court. Cal. Evid. Code §452(d). 8Franchising in the Economy 1974-1976, United States Depart- ment of Commerce/Domestic and International Business Admin- istration/Bureau of Domestic Commerce. 24 ments of tens of thousands of these franchisees are jeopardized if the franchisor can wield a two edged sword which permits the franchisee to realize his in- vestment in his business so long as he is in good stand- ing with the franchisor but forfeits that investment by not being allowed to sell his business if he is termi- nated—whatever the reason. This anticompetitive abuse is real® and should be dealt with now before too many more small American businessmen suffer the fate of the Nobles and the other Sacramento Bee city newsstand distributors, Confiscation of a man’s estimated $163 billion worth of sales in 1976. The aver- it is used to unreasonably restrain interstate trade and commerce. CONCLUSION For these reasons, a writ of certiorari should issue to review the judgment and opinion of the Ninth Circuit. Respectfully submitted, G. JosEPH BERTAIN, JR., Trmoruy H. FIne, Attorneys for Cross-Petitioners. Dated, August 16, 1976. °FTC Srarr Report or Ap Hoc ComMITTEE ON FRANCHISING, submitted to the Federal Trade Commission, June 2, 1964, p. xi (Conclusions Proposed by Mr. Rufus E. Wilson, Chief, Bureau Restraint of Trade). --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_0471%3A1. Public record. Not legal advice.