Petition — Ve-Ri-Tas, Inc. v. Advertising Review Council of Metropolitan Denver, Inc.

Supreme Court brief1978

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IN THE SUPREME COURT OF THE UN} hED, STATES ™

FILED

€27-1362 «ABR 8B 1978

_—

a . > re

VE-RI-TAS, INC. and PAT WALKER'S

OF COLORADO, INC.,

Petitioners,

vs.

ADVERTISING REVIEW COUNCIL OF

METROPOLITAN DENVER, INC.; ROCKY

MOUNTAIN BETTER BUSINESS BUREAU,

INC.; ADVERTISING CLUB OF DENVER;

W. DAN BELL; WILLIAM L. COOK;

JERRY GART; WILLA BROWN; ROBERT E.

JORDAN; GALEN E. BROYLES; MARILYN

MASSEY; GORDON R. YATES; ALBERT

FAY HILL; CELESTINO G. MENDEZ;

JEAN LARSON; ROY L. JANSEN;

DON PUFFER; and GEORGE TRUESDELL,

Respondents.

BRIEF OF RESPONDENTS IN RESPONSE TO

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

John D. Phillips, Jr.

Thomas B. Kelley

YEGGE, HALL & EVANS

1340 Denver Club Building

518 - 17th Street

Denver, Colorado 80202

(303) 573-5022

Attorneys for Respondents

TABLE OF CONTENTS

Page

I. INTRODUCTION .........eee00e 1 C. Commerce Clause .......

II. QUESTIONS PRESENTED FOR VXI. COMCLUBGION ccccoccecccseceeses

RE ac udGaocowedciel anes 3

III. STATEMENT OF THE CASE ...... 7

A. Background .....eeeeees ll

B. Plaintiffs ..cccccccces 18

Cc. DefendantS ...c.cceceeee 21

D. Walker's Advertisements 31

E. Filing of Charges

by D.A. e*e eeensreeeee#eee#ee#e#e 37

F. Miscellaneous ......... 38

IV. SUMMARY OF ARGUMENT ........ 48

V. ARGUMENT ..ccccccccccccccsece 50

A. Civil Rights Act ...... 50

1. Symbiotic

Relationship ..... 50

2. Public Function .. 57

3. Due Process ...... 69

B. Sherman Act ...eeeeeeee 73

1. Jurisdiction ..... 74

y Fashion Origina-

tors' Guild ...... 80

Be Saegesee F eéceseoce 90

ofia

-i-

TABLE OF AUTHORITIES

Cases

American Mercury, Inc. v. Chase,

13 F.2d 224 (D. Mass. 1926) ....

Bailey's Bakery Ltd. v. Contin-

ental Baking Co., 235 F. Supp.

705 (D. Hawaii 1964) e*eeeeeneeeeee#

Billy Baxter, Inc. v. Coca-Cola

Co., 431 F.2d 183 (2d Cir.

1970), cert. denied, 401 U.S.

923, 91 S. Ct. 877, 28 L.Ed.2d

553 (1971) wccccccccccccccccccce

Bridge Corporation of America v.

American Contract Bridge League,

Inc., 428 F.2d 1365 (9th Cir.

1970), cert. denied, 401 U.S.

940, 91 S. Ct. 940, 28 L.Ed. 2d

220 (1971) ccccccccccccccccccece

Brosious v. Pepsi-Cola Co., 155

F.2d 99 (3d Cir. 1946) ...ccceee

Browns v. Mitchell, 409 F.2d 593

(10th Gir. 1969) eeeeeeveeeeeeeene

Burke v. Ford, 377 F.2d 901 (10th

Cir. 1967), rev'd on other

grounds, 389 U.S. 320, 88 S. Ct.

443, 19 L.Ed.2d 554 (1968) .....

Burton v. Wilmington Parking

Authority, 365 U.S. 715, 81

S. Ct. 856, 6 L.Ed.2d 45

(1961) ccccccccccccccccccccccece

-iii-

67,68,

50,51,

52,54

TABLE OF AUTHORITIES (Continued)

Cases

Cornfeld v. United States, 367

Foam & (SGM Cas BPSG) coccceces

Deesen v. Professional Golfers'

Association of America, 358

F.2d 165 (9th Cir. 1966) cert.

denied, 385 U.S. 846, 87 S. Ct.

74, 17 L.Ed.2d 76 (1967) .......

District of Columbia Citizen

Publishing Co. v. Merchants

Manufacturing Co., 83 F. Supp.

994 (D.D.C. 1949) ccccccccccsece

Eastern Railroad Presidents Con-

ference v. Noerr Motor Freight

Inc., 365 U.S. 127, 81 S. Ct.

523, 5 L.Ed.2d 464 (1961) ......

Eastern States Lumber Dealers

Association v. United States,

234 U.S. 600, 34 S. Ct. 951,

Se Molle BGO EESSEP cooecoccese

Elizabeth Hospital, Inc. v.

Richardson, 269 F.2d 167 (8th

Cir. 1959) e*eeeseeensteneeneeneeeneeeee#ee#e

Evans v. Newton, 382 U.S. 296, 86

S. Ct. 486, 15 L.Ed.2d 373

(1966) eeeeeveeeeeeeeeeeeeeeeeeeee

90,91

Fashion Originators’ Guild of America

v. Federal Trade Commission, 312 U.S.

457, 61 S. Ct. 703, 85 L.Ed. 949

(1941) wcccccccccccccccccccccces

6,80

81,87

TABLE OF AUTHORITIES (Continued)

Cases

Ford v. Harris County Medical

Society, 535 F.2d 321 (5th

Cir. 1976) eeeneeeneee8kee e*eeeeeeee##e#e

Foster & Kleiser Co. v. Special

Site Sign Co., 85 F.2d 742

(9th Cie. 1936) e*eeeeeeentee#se © @

Gambino v. United States, 275 U.S.

310, 48 S. Ct. 137, 72 L.Ed.

293 (1927) eeeeeeeeeeeeeneeneeeeee

Garvey v. Freeman, 397 F.2d 600

(10th Cir. 1968) eeeeeeeveeee eee

Gilmore v. City of Montgomery,

417 U.S. 556, 94 S. Ct. 2416,

41 L.Ed.2d 304 (1974) e*eeeeneeeees

Hannah v. Larche, 363 U.S. 420,

80 S. Ct. 1502, 4 L.Ed.2d 1307

(1960) eeeeeeeeeeeeeeeeeeeeeeeee

Hudgens v. NLRB, 424 U.S. 507,

96 S. Ct. 1029, 47 L.Ed.2d 196

(1976) eeeeeeneeeeeeeeeeeeneeneeeeeee

Hyser v. Reed, 318 F.2d 225 (D.C.

Cir. 1963), cert. denied, 375

U.S. 957, 84 S. Ct. 446, ll

L.Ed.2d 315 (1963) ceccccccccces

Jackson v. Metropolitan Edison

Company, 419 U.S. 345, 95 S. Ct.

449, 42 L.Ed.2d 477 (1974) .....

70,72,

TABLE OF AUTHORITIES (Continued)

Cases

John Kalin Funeral Home, Inc. v.

Fultz, 313 F. Supp. 435 (W.D.

Wash. 1970), aff'd, 442 F.2d

Bae GOO Gals EPFL) cocccececce

Joseph E. Seagram & Sons, Inc.

v. Hawaiian Oke and Liquors,

Ltd., 416 F.2d 71 (9th Cir.

1969), cert. denied, 396 U.S.

1062, 90 S. Ct. 752, 24

Dee FE GEETOD coccccccececce

Kallen v. Nexus Corporation, 353

F. Supp. 3 (N.D. Ill. 1973) ....

Lieberthal v. North Country

Lanes, Inc., 332 F.2d 269 (2d

Cir. 1964) eoeeeeeeeeeeeeeeeeee

Marsh v. Alabama, 326 U.S. 501,

66 S. Ct. 276, 90 L.Ed. 265

(1946) eeeeeeeeeeeeeeeeene *eeeeee

McCann v. New York Stock Exchange,

107 F.2d 908 (2d Cir. 1939) ....

Moose Lodge No. 107 v. Irvis, 407

Dre CRUGED cececoccccocce

Page v. Work, 290 F.2d 323 (9th

Gir. 1961) eseenereeneeeeeeneeneeeeeeee

Radiant Burners, Inc. v. People's

Gas, Light and Coke Co., 364 U.S.

656, 81S. Ct. 365, 5 L.Ed.2d 358

Di] Sie SeGRSGseeeeccocecceceoce

76,78

85,86

76,78

TABLE OF AUTHORITIES (Continued)

Cases Page

Riggall v. Washington County

Medical Society, 249 F.2d 266

(8th Cir. 1957) e*eeeeesefee#esfetsertfe#sess#*¢ 76

Roofire Alarm Co. v. Royal Indemnity

Company, 202 F. Supp. 166 (E.D.

Tenn. 1962), aff'd, 313 F.2d 635

(6th Cir. 1963) eoeeeeeeeeeeeeeer 93

Shelley v. Kraemer, 334 U.S. l,

68 S. Ct. 836, 92 L.Ed. 1161

(1948) oeeeeeeeeeeeeeeeeeeeeeenee 62

Sigma Chi Fraternity v. Regents

of the University of Colorado,

258 F. Supp. 515 (D.C. Colo.

1966) wccccccccccccccccccccccece 10,71

Spears Free Clinic and Hospital

v. Cleere, 197 F.2d 125 (10th

Cir. 1952) e*eneeeeeseseoer#sekieee#s#fee#e#eeeete8eee 76

Sugar Institute v. United States,

297 U.S. 553, 56 S. Ct. 629, 80

L.Ed. 859 (1936) eeeeeneeeeeeeeee: 82,83

Sun Valley Disposal Co. v. Silver

State Disposal Co., 420 F.2d

341 (9th Cir. 1969) .....22222-- 76

Syracuse Broadcasting Corp. v.

Newhouse, 319 F.2d 683 (2d Cir.

1963) SCOOOOSOE SSE OSES OSOESESEEES 90

Terry v. Adams, 345 U.S. 461, 73

S. Ct. 809, 97 L.Ed. 1152

(1953) eeeeeeeneeneeeeeeneeneneeneeeee 58

-vii-

—

TABLE OF AUTHORITIES (Continued)

Cases

United Mine Workers of America v.

Pennington, 381 U.S. 657, 85

S. Ct. 1585, 14 L.Ed.2d 626

CESSES) cccceseecesececoceeceecee

United States v. Davis, 482

P.24 893 (Sth Cir. 1973) cccccce

United States v. Price, 383 U.S.

787, 86 S. Ct. 1152 (1966) .....

United States v. Starlite Drive-

In, 204 F.2d 419 (7th Cir.

1953) e*eee#*eee#ee#*ee#e+eeee#ee#e#e#es+feesee*ee#ee#ee#ee#ee#e#e#ee#ee#e«

Ward v. St. Anthony Hospital,

476 F.2d 671 (10th Cir. 1973) ..

Williams v. United States, 341

U.S. 97, 71 S. Ct. 576, 95 L.Ed.

775 (1951) eeeeeveeveeeeeeeeeeeeee

Statutes

oF F CONST. art. I, § 8 e*enerenereenseesee

15 0.8.C. § l (1974) eeeeeeeeeeeee

15 U.S.C. § 2 (1974) eeeeveeeeeeevee

42 U.S.C. § 1983 (1970) eoeeeeeeveene

-viii-

50,54,

12,93

12,14,

74,75

12,16,

75,90

12,68

TABLE OF AUTHORITIES (Continued)

Cases Page

Rule 56(e) of the Federal Rules

of Civil PreeceGEEe ceocecsecsccseoss B,h8

Colo. Rev. Stat. § 40-5-301 ...... 38

INTRODUCTION

Because of the inability of the

petitioners to posture this matter to

fall within the considerations set forth

in Rule 19 of the Rules of the Supreme

Court of the United States, they have

taken great liberty with the material

facts which, to this point, the respon-

dents did not believe were in controversy

and which the Honorable Richard P.

Matsch in his opinion at 411 F. Supp.

1012, 1014, 1016 (D. Colo. 1976) found

as “uncontroverted facts" in granting

respondents’ motion for summary judgment.

Furthermore, petitioners did not challenge

any of the trial court's findings of

fact in their appeal to the Tenth Circuit.

Also, the characterization by

the petitioners, at p. 2 of their petition,

of Judge Matsch's decision as simpiy

constituting a "dismissal of petitioners'

Complaint for damages and injunctive

relief" is incomplete, to say the least.

As noted by Judge Matsch in granting

respondents’ motion for summary judgment

at p. 1014 of 411 F. Supp.: "The parties

engaged in extensive discovery and upon

the facts developed, both plaintiffs and

defendants have filed cross motions for

summary judgment upon which a hearing

was held. The issues are now presented

for final disposition"; and as observed

by the Tenth Circuit at p. 964 of 567

F.2d: “The facts were fully developed

in the course of extensive discovery,

and both sides filed motions for summary

judgment. The parties agreed that the

record was complete.” |

In their statement of the

guestions presented for review, petitioners

arbitrarily characterize the questions

and the terms ana circumstances set

forth therein in a manner which has no

foundation in the record. Petitioners

actually argue their case in attempting

to frame the questions.

Because of what respondents believe

to be numerous inaccuracies and misleading

statements by the petitioners in the

facts and questions for review, respondents

will set forth in detail their statement

of the issues and facts.

II.

QUESTIONS PRESENTED FOR REVIEW

1. Was the trial court's conclusion

(which was affirmed by the Tenth Circuit)

that the respondents had no symbiotic

relationship with government and accord-

ingly were not acting under the color of

state law correct in that:

(a) They had no call upon the

power of prosecution to threaten criminal

charges to enforce their views with

respect to advertising content; and

(b) The filing of a criminal

complaint alleging false and misleading

statements in its advertising against

petitioner Walker's by the Denver District

Attorney was the result of the exercise

of the prosecutor's independent judgment

and not the result of coercion by any of

the respondents?

2. Was the trial court's conclusion

that the respondents were not substituting

private for public authority and were

not performing a public function (which

was affirmed by the Tenth Circuit on

the basis that the Better Business

Bureau clearly does not function as an

arm of official enforcement), and were

accordingly not acting under color of

state law correct in that:

(a) The respondents seek only

to enforce the Better Business Bureau's

private advertising code which is not

the equivalent of any state statute or

ocdinance; and

(b) The respondents' enforce-

ment mechanism is nothing more than a

call of public attention to the offending

conduct?

3. Was the trial court's conclusion

correct that, assuming action under

color of state law, the respondents'

actions were consistent with applicable

standards of due process in that:

(a) The only sanction available

to respondents was the use of adverse

publicity;

(b) The petitioners were

given an opportunity to participate in a

hearing and an opportunity to formulate

a public statement about the findings of

the reviewing panel; and

effort to use the process available to

them?

4. Was the trial court's conclusion

(which was affirmed by the Tenth Circuit)

correct that Fashion Originators’ Guild

of America v. Federal Trade Commission is

inapposite because, in this case, there

is no refusal to deal and no concerted

effort to attempt to boycott or cause

others to refuse to deal with petitioners

under Section 1 of the Sherman Act in

that there is no effort to persuade

advertising media to refuse to accept the

advertising in question?

5. Was the trial court's conclu-

sion (which was affirmed by the Tenth

Circuit) correct that there was no

violation of Section 2 of the Sherman

Act in that:

(a) There was no intent to

monopolize by excluding petitioners from

any Denver market;

(b) None of the respondents

are in competition with Walker's in the

weight loss market;

not inhibited by the two major Denver

metropolitan newspapers; and

(d) Walker's continued to

advertise after the date of the press

release as well as after the filing of

the criminal charges?

6. Was the trial court's conclu-

sion (which was affirmed by the Tenth

Circuit) correct that it did not have

jurisdiction to grant private relief

under the Commerce Clause of the United

States Constitution?

-6(a)-

III.

STATEMENT OF THE CASE

Judge Matsch in his opinion at 411

F. Supp. 1013, 1014 (D. Colo. 1976)

found, and the respondents so believe,

that the essential facts are not in

controversy. Those uncontroverted facts

are set forth at pp. 1014-1016 of the

opinion. They were not challenged by

petitioners upon appeal to the Tenth

Circuit, and petitioners did not directly

take issue with the trial court's

findings in their petition to this

Court.

Notwithstanding, however,

petitioners have been very loose in

their presentation and characterization

of the facts in their petition and have

failed to inform this Court of the

source for many of their statements,

1 filed by them in

which is a document

the trial court and much of which is

purely argumentative and rank hearsay.

Accordingly, many of petitioners’

statements do not reflect facts actually

contained in the record, and many of the

statements which purportedly set forth

facts were not properly before the

United States District Court under Rule

56(e) of the Federal Rules of Civil

Procedure.

For the purposes of this

response, respondents will point out

initially a sample of those statements

and characterizations which are misleading

and distorted.

lentitled "Plaintiffs' Memorandum in

Opposition to Defendants’ Motions and in

Support of Plaintiffs" Motions for

Summary Judgment and to Strike the

Defendants' Insufficient Defense," it

consisted of 140 pages of argument, plus

130 exhibits and affidavits with 152

footnote references.

As one example of the extremes to

which the petitioners have distorted the

facts in order to attract this Court's

attention, the petitioners at p. 15 of

their petition claim that the membership

of the respondent, Rocky Mountain Better

Business Bureau, Inc. ("BBB"), includes,

among others, "businesses and enterprises

in health related fields, including

doctors, and retailers of sporting goods,

exercise and weight loss equipment, in

competition with the petitioners."

(Emphasis added.) The only suggestion by

petitioners in the record below of

competition with the business of

petitioners, one of whom operated a

purported weight reducing salon where

ladies could lose weight without exer-

cising, was a reference by petitioners to

Gart Brothers Sporting Goods Company, of

which respondent Gart is president, to

the effect that, because that company

sells exercise equipment, it is in

competition with the petitioners. This

is somewhat strained. As noted by Judge

Matsch at p. 1019 of 411 F. Supp.:

"Indeed, none of the defendants

appears to be in competition with

the plaintiffs in the weight loss

market. It is too much to say that

every sporting goods store is in

competition with weight reduction

salons simply because there is the

sale of exercise equipment.”

The additional suggestion that any

physician members of the BBB compete

with petitioner Walker's is ludicrous.

Likewise, the offhanded characteri-

zation of the BBB as an "informal screen-

ing service for the Colorado Attorney

General and the Denver District Attorney"

at p. 16 of the petition is totally

without foundation, as will be more

fully discussed below.

The reference on the same page to a

"1974 survey” conducted by the University

of Denver College of Business Admini-

stration and which was not supported by

o1@=

an affidavit from anyone is one example

of many instances in which the petitioners

base their arguments on sources which,

being hearsay, are not properly in the

record pursuant to Rule 56(e) of the

Federal Rules of Civil Procedure.

The following, then, is respondents’

statement of the case; it is essentially

the same statement set forth in respon-

dents’ brief submitted to the Tenth

Circuit, which brief contained extensive

citations to the record. It can be

reviewed by this Court, to the extent

deemed necessary, to supplement the

uncontested findings of fact set forth

in the trial court's opinion below.

Background

This action was commenced by the

filing of a complaint on July 17, 1974.

elie

The complaint alleges three claims.

Count I alleges actions under color of

state law and seeks redress under 42

U.S.C. § 1983 (1970). Count II alleges

causes of action under Sections 1 and 2

of the Sherman Act (15 U.S.C. §§ 1 and 2

(1974)). Count III asserts a claim

based upon U.S. CONST. art. I, § 8, the

so-called "commerce clause.”

The basis for Count I is 42 U.S.C.

§ 1983, which provides:

"Every person who, under color of

any statute, ordinance, regulation,

custom or usage, of any state or

territory, subjects, or causes to

be subjected, any citizen of the

United States or other person

within the jurisdiction thereof to

the deprivation of any rights,

privileges or immunities secured by

the Constitution and laws, shall be

liable to the party injured in an

action at law, suit at equity, or

other proper proceeding for redress.”

Petitioners allege that the respon-

dents under color of state law have

engaged in activities which deprived

them of due process of law as guaranteed

by the Fourteenth Amendment to the

Constitution of the United States. In

this regard, the petitioners’ allegations

in their complaint were that the BBB

requested Pat Walker's of Colorado, Inc.

("Walker's") to discontinue or to

modify advertising practices in violation

of the "Advertising Code of American

Business"; that upon Walker's refusal to

comply the BBB filed a complaint with

the Advertising Review Board ("ARB") of

the Advertising Review Council of Metro-

politan Denver, Inc. ("Council"); that

the Council informed Walker's that, if

after a hearing on the complaint by the

ARB the finding was adverse to the

advertiser and if it did not then dis-

continue or modify its advertising,

the ARB would release a statement to the

media and turn its files over to the law

o} =

enforcement authorities; that these acts

tended to cause petitioners (and other

advertisers) in the Denver area to

submit to the demands of the BBB and

result in the dominion, control and

censorship of advertising by the BBB and

restraint of competition; that the

foregoing activities are solely and

purely a governmental function; and that

the standards and procedures employed by

the BBB, the Council and the ARB denied

petitioners procedural and substantive

due process of law as guaranteed by the

Fourteenth Amendment of the Constitution

of the United States.

The facts alleged in the complaint

as constituting a violation of Section 1

of the Sherman Act are as follows: the

respondents entered into a conspiracy

under the terms of which the BBB, the

Council and the ARB would (1) attempt to

-14-

coerce local advertisers in the Denver

area, through threats of public dis-

paragement, into complying with the

respondents’ advertising standards;

(2) conduct “trials” of advertisers

refusing to comply; and (3) upon con-

tinued refusal to comply expose such

advertisers to public disparagement

resulting in "the threat of loss of

business."

The effect of the conspiracy is

alleged to be a suppression of competition

through advertising among advertisers

dealing in like products or services in

the Denver area and to a deprivation of

consumers of the opportunity to purchase

those products at highly competitive

prices. The acts of the respondents

allegedly also cause a loss of revenues

to "[petitioners] and other advertisers

in the Denver area."

cay

Petitioners also alleged that a

monopoly in violation of Section 2 of

the Sherman Act arises from the fore-

going.

Walker's sought damages for loss of

business and injunctive relief, while

petitioner Ve-Ri-Tas, Inc. requested

injunctive relief only.

Initially, petitioners sought a

temporary restraining order and prelim-

inary injunction prohibiting the issuance

by one of the respondents of a press

release criticizing the advertising

practices of Walker's. After a hearing

held on July 17, 1974, the same day the

complaint and companion documents were

filed, the United States District Court

denied the petitioners' motions.

After the filing of motions by

respondents directed at jurisdictional

defects and failure to state claims in

o1 6@

the complaint, petitioners filed an

amended complaint on or about September 30,

1974.

Respondents then renewed their

motions as directed to the amended

complaint.

Nevertheless, the parties engaged

in extensive discovery; and, upon the

facts developed, both petitioners and

respondents filed cross-motions for

summary judgment which were argued to

the trial court on September 4, 1975.

At the hearing, the parties agreed that

the record was complete and that the

issues were being presented for final

disposition.

On April 7, 1976, the District

Court entered its Memorandum Opinion and

Order granting summary judgment in favor

of respondents on all of petitioners'

claims and dismissed the civil action.

o} Jo

Plaintiffs

Petitioner Ve-Ri-Tas, Inc.

("Ve-Ri-Tas"), a California corporation

with a manufacturing plant and offices

in Los Angeles, California, leases

figure perfection equipment in several

states and also owns and operates two

reducing salons in Houston, Texas.

Petitioner Walker's, a Colorado

corporation, owns and operates a figure

perfection salon in Denver, Colorado.

Its customers come from the Denver

metropolitan area, and, with rare

exceptions, it has attracted no cus-

tomers from the surrounding states of

Wyoming, Nebraska, Kansas, New Mexico,

or from any other states.

Walker's operated its salon with

reducing machines leased from Ve-Ri-Tas

under a standard form rental agreement

oi Ge

which provided for a down payment and a

fixed monthly rental.

The standard rental agreements

between Ve-Ri-Tas and Walker's were

supplemented by letter to include a

grant to Walker's of an exclusive

territory and the right to use the name

"Pat Walker's Figure Perfection Salon,”

and an undertaking by Ve-Ri-Tas to

provide training of personnel, counsel-

ing, and "advertising slicks which it

has available" to Walker's.

Ve-Ri-Tas did furnish to Walker's

some training of personnel, some adver-

tising supplies, a script for the

reducing program, occasional parts and

supplies, and several visits (at the

lessee's expense) for public relations

purposes by its national supervisor and

its president.

No financial or operational advice

was ever given by Ve-Ri-Tas to Walker's,

-19-

and Ve-Ri-Tas does not have access to

its lessees' financial books and records,

does not participate in the formulation

of their budgets, does not participate

in their marketing operations, and does

not maintain controls on the lessees'

Operation or dictate to them how the

salons should be run.

Ve-Ri-Tas did furnish advertising

Slicks produced by an independent

advertising agency to Walker's without

cost. The advertisements were prepared

for salons owned by Ve-Ri-Tas, and

Walker's then tailored the copy to its

Own needs.

Ve-Ri-Tas has no plants in Denver,

no offices in Denver, owns no real

estate or personalty in Denver, has no

employees in Denver, sells no products

in Denver, and purchases no goods or

services in Denver. Ve-Ri-Tas does not

=-20-

do any business in Denver, and it does

not advertise in Denver.

Cc.

Defendants

Respondent BBB is a private non-

profit corporation organized under the

laws of the State of Colorado. [It

receives no financial or other type of

assistance from the State of Colorado.

BBB is an organization of 815

businesses of different varieties and of

approximately 100 consumers in the

Denver metropolitan area. Business

membership is predicated on having been

in business for at least one year with a

satisfactory complaint record. The BBB

is funded by dues from its members,

public donations, and sales of litera-

ture to the public. Members subscribe

to a creed of truthful advertising.

The BBB monitors advertising in the

local media and receives complaints from

@2)<

consumers and others concerning decep-

tive sales and advertising practices in

the local Denver metropolitan area.

When a complaint is received, or a

deceptive practice identified, the BBB

attempts to mediate with the advertiser

and bring about a voluntary correction

of the objectionable practice. The BBB

may "shop" the business in question and

compile investigative data.

Members agree to be bound by the

grievance procedures and, if a voluntary

resolution is not reached, the BBB would

refer a complaint against a member to

its grievance committee. The grievance

procedure involves a hearing by tne

grievance committee to consider the

advertising practices under question.

If an adverse determination is reached,

a member may be expelled. Such hearings

involving members averaged five per

year; and, in September of 1974, the BBB

-22-

expelled six of its members and issued a

news release announcing the expulsion.

Moreover, the BBB does refer

problems concerning members' advertising

to the district attorney.”

Nonmembers have a choice of the

grievance procedure or an arbitration

procedure. > Other than expulsion of a

member, the procedures with respect to

reviewing members’ advertising and

nonmembers' advertising are essentially

the same.

Respondent Advertising Club of

Denver ("Ad Club") is a private non-

profit corporation incorporated under

rhe facts belie petitioners’ protesta-

tions about members being treated

differently than nonmembers.

3The petitioners erroneously state on

p. 22 of their petition that, prior to

the establishment of the Council, non-

member complaints were referred to

government officials. Such is not the

case; arbitration was frequently used,

if the nonmembers would agree to arbitrate.

@23@

—

the laws of Colorado. Its membership

consists of ebvertisias agencies and

persons in the advertising business, and

it receives no financial or other type

of assistance from the State of Colorado.

Respondent Advertising Review

Council of Metropolitan Denver, Inc.

("Council") is a private nonprofit

corporation which was incorporated in

Colorado by Respondents Bell, Cook,

Brown, Jordan, Yates, Massey, Gart and

Broyles“ on February 26, 1974, under the

auspices of the BBB and the Ad Club. It

receives no financial or other type of

assistance from the State of Colorado.

4Re11 is general manager of the BBB.

Cook is the chief executive officer of a

furniture company. Jordan is an officer

of Mountain States Bank. Brown is the

executive director of the Ad Club. Gart

is the president of a local retail

sporting goods company. Massey is an

advertising employee of a department

store. Yates is an officer in an

advertising agency business. Broyles, a

former ad agency executive, is retired.

=2f>

According to its Articles of Incorpora-

tion, the purpose of the Council is "to

create and maintain the Advertising

Review Board of Metropolitan Denver

formed to sustain the highest standards

of truth and accuracy in advertising

through self regulation."

The Council promulgated a "Statement

of Organization and Procedures" to

govern the nomination and tenure of

members of the ARB and the procedure by

which panels selected from the ARB, under

the direction of its chairman, would

evaluate advertising claims presented for

review under the standards of truth and

accuracy. These are intended as ethical

as opposed to legal standards, and the

ARB deals only with questions of the

truth or accuracy in the content adver-

tising.

The ARB consists of at least 30

members, and the panels selected to

=25-

consider advertising claims are to

consist of at least five of these per-

sons. The composition of the ARB is

required to be 40% local advertisers, 30%

local advertising agencies, and 30% local

public members.

The BBB is responsible for receiving

or initiating complaints against adver-

tisers and then evaluating, investigat-

ing, analyzing and holding initial

negotiations with an advertiser on

complaints or questions from any source

involving the truth or accuracy of local

or regional advertising. If an adver-

tising matter cannot be satisfactorily

resolved through the voluntary procedures

employed by the BBB, then either the BBB,

the advertiser, or the complainant may

request review by the ARB.

Upon receipt of a request for

review, the ARB chairman appoints a panel

@26-

of five members. The chairman informs

all parties as to the identity of the

panel members and mails copies of the

request for review, and any responses

thereto, to the panel members. Ten days'

notice of any hearing or meeting to

review the advertising is given to all

parties of the date, place and procedure.

All evidence and oral testimony to be

introduced in any matter before the ARB

is available for inspection at any time.

Any interested parties may appear at the

hearing and offer testimony, argument, or

cross-examination.

The ARB notifies the advertiser in

writing of its decision and the reasons

therefor and, if adverse, requests

modification or withdrawal of the adver-

tising in question. The advertiser is

given ten days to respond; failing such

response, or modification of the adver-

tising, the advertiser may be notified,

@2F=

that the matter will be made public and

the records made available to appropriate

local and state agencies and that it may

submit, within five days, a concise

statement of its views on the contro-

versy, which also will be released by the

ARB to the news media. The chairman may

then inform the appropriate local or

state governmental agency by letter of

the ARB's decision that an advertisement

is misleading and that the file is

available for examination upon request.

The ratio of members on a given

panel is required to be in the same ratio

of membership as the full ARB. An adver-

tiser member of the ARB is considered to

be not qualified to serve on an indivi-

dual panel if his employing company

manufactures or sells a product or

service which in the opinion and dis-

cretion of the chairman competes with the

~29~

product or service sold by the advertiser

involved in the proceeding. An agency

member of the ARB is considered as not

gualified if his advertising agency

represents a client that sells a product

or service which competes with the

product or service involved in the

proceeding. An ARB member, including a

non-industry member, shall be disquali-

fied if for any reason arising out of

past or present employment or association

he cannot be expected to reach a com-

pletely unbiased decision. The chairman

of the ARB has the responsibility to

substitute new panel members if an

Original member has shown bias or con-

flict of interest.

Respondent Hill~ is chairman of the

ARB. Respondents Mendez, Larson, Jansen,

SHill is a minister and author.

@290

Puffer and Truesdale°® were members of

the ARB panel selected to review the

advertising of Walker's.

On April 10, 1974, the Council held

a press conference at which the forma-

tion of the Council was announced.

Present at the news conference were the

Colorado Attorney General, one of his

assistants, the Denver District Attorney,

the Secretary of State of Colorado, and

Felicia Muftic, Executive Director of

the Metropolitan District Attorneys’

Consumer Affairs Office. The Attorney

General was reported as stating, “Honest

self regulation is a superior thing to

government regulation." Felicia Muftic

was reported as saying she was “pleased

they include a college teacher, a clerk

of the Senate of the State of Colorado,

the president of an appliance store, the

director of a credit bureau, and a

representative of an advertising agency.

-30-

—meamea@tifti inn HE FS & EE F&F & & @ aa

to see the Board formed." Other than

these general endorsements and encourage-

ments at the meeting, the Council and

ARB have not received any endorsements

from any state agencies.

Walker's Advertisements

On May 23, 1974, at an organiza-

tional meeting of the ARB, the BBB

presented the names of the advertisers

and examples of advertising claims,

7 which

including advertising by Walker's,

would be the subject of the first set of

complaints before the ARB. Chairman

Hill inquired of the ARB members present

as to whether there was any conflict of

interest as defined by the Council's

Statement of Organization and Procedures.

Hill also made an inquiry into the

™No actions have ever been directed at

Ve-Ri-Tas.

eZee

————-

backgrounds of all panel members rela-

tive to possible bias or interest on the

part of the ARB members toward the

subject advertising.

On June 4, 1974, Hill sent a letter

to Walker's announcing a referral to the

ARB by the BBB of a complaint regarding

Walker's advertising. This letter set

forth the advertising being challenged,

the names of the panel members, and

advised Walker's that the procedures

governing the ARB called for public

disclosure of its decision with the

relevant documents and data and inform-

ing the appropriate local and state

governmental agencies of the panel's

decision.

On June 10, 1974, C. G. Mendez, the

Chairman of the ARB panel appointed to

review the Walker case, sent Walker's a

letter advising that a meeting would be

@32@

held on June 27, 1974, for a review of

the advertising complaints, and inviting

Walker's to appear to present evidence

and its position.

Walker's counsel requested copies

of all documents relative to ARB pro-

cedures, and the documents were given to

him before June 24, 1974. On that day,

Walker's counsel wrote to Hill raising

procedural due process objections and

denying that the ARB had any jurisdic-

tion to consider any complaints against

his client.

The panel did meet on the evening

of June 27, 1974. There was no appear-

ance by anyone representing Walker's.

BBB representatives attended and pre-

sented materials which resulted in the

panel's determination that certain

Walker's ads were misleading. The

condemned advertising practices included

@33=-

the use of a testimonial made by the

wife of the president of Walker's

without disclosure of the husband/wife

relationship; claims of weight reduction

through the use of "passive exercise

equipment"; and claims that no contracts

involving binding obligations were

involved without disclosure of the fact

that the customer is required to prepay

25% of the cost of an extended program

and that the prepayment is applied only

to the last 25% of the prescribed number

of treatments.

By letter dated June 30, 1974, Hill

advised Walker's that the panel meeting

had been held, and the specific charges

and findings made were set forth in that

letter. Hill requested that Walker's

cease the use of the offending adver-

tising within a reasonable time, and he

asked to hear from Walker's within ten

ogo

days “regarding your ‘acceptance,

rejection or request for modification or

reconsideration of the board's decision.'"

There was no reply to that letter.

On July 16, 1974, Hill wrote another

letter to Walker's to advise of the

ARB's intention to make the findings

public and to make the records available

to appropriate local or state agencies.

In that letter, he also said that, if

Walker's submitted a concise statement

of its view, the statement would be

published and released simultaneously

with the ARB release. Walker's did not

avail itself of this opportunity.

On July 17, 1974, the date on which

this action was commenced in the United

States District Court, the petitioners

moved for a temporary restraining order

and preliminary injunction against any

news release. That motion was denied

o3§=

- 4 . “ © eee een

: : “> : ta ee CS ee

7 bvtas 2 es 2 a - . Ne : 4 - a “+, AS ks Shale D _" oe st

: mis it i a tikes whhaes: ; oe) ee eee ee eee, ao ace, eetiaee x: he . D

because it would have been a prior

restraint of speech.

On September 12, 1974, Hill held a

news conference at which he released the

panel's findings and a statement that

the ARB panel found Walker's advertising

to be misleading or unethical. 8

Immediately prior to the news

conference, Hill wrote a letter to the

Denver District Attorney's office,

enclosing a copy of the panel's findings,

and invited this agency to inspect the

ARB files. Later, Hill addressed a

letter to the Denver District Attorney

demanding the filing of charges against

Walker's. These were the only communica-

tions which the ARB had with governmen-

tal agencies concerning Walker's.

8rhe Walker matter is the only one which

has been the subject of the Council's

entire procedural process.

=36-

E. misdemeanor charges against Walker's for

Filing of Charges by D.A. violation of Colo. Rev. Stat. § 40-5-301,

The Metropolitan District Attorney's as amended, prohibiting false or mis-

Consumer Affairs office in Denver,

Colorado, through Suzanne Lynch, Deputy

District Attorney in Denver, had pre-

viously instigated its own review of

Walker's advertising in May or June of

1974, independent of the investigation

then being conducted by the BBB. This

investigation was prompted by the

reading of one of Walker's ads by Lynch.

Following the September 12th press

release by Hill, and the reading thereof

by Lynch in a local newspaper, Lynch's

representative visited the BBB office

and was allowed to review Walker's

information. Lynch herself never

discussed the Walker's case with

respondent Bell.

On October 14, 1974, the Denver

District Attorney's office filed

@37@

leading statements in advertising.

Miscellaneous

The respondent organizations are

private entities and the individual

respondents are private individuals.

None is alleged to have acted in any-

thing but a private capacity. Respon-

dents receive no government financing or

other government assistance from the

State of Colorado and are not government

regulated.

Representatives of the Colorado

Attorney General's office, the Denver

District Attorney's office, and certain

federal agencies, along with newspaper

reporters and others, occasionally seek

information from the BBB, and the BBB

-38-

makes the information available upon

request. For the most part, the infor-

mation compiled by the BBB which is made

available to agencies in this fashion

was prepared for its own purposes

without instigation by any state agency.

The purposes for which these agencies

seek information maintained by the BBB

are (1) to determine whether the subject

of a consumer complaint has been the

subject of other consumer complaints so

as to call for further investigation and

(2) to locate persons who had knowledge

of the advertising practice in question

and who could be sought as potential

witnesses. These inquiries by state

agencies are not made pursuant to any

regular pattern.

The BBB is one of several private

organizations from which such informa-

tion is sought by the District Attorney's

-39-

office. The information is freely

given. Otherwise, available subpoena

powers could be exercised.

Occasionally, the BBB will assemble

and submit to governmental agencies

information concerning advertisers which

it believes may warrant official legal

action.

On several occasions BBB employees

conducted investigatory shopping of

certain Denver businesses at the request

of one representative of the Colorado

Attorney General's office in order to

supplement previous BBB information, but

petitioners were not involved.

The District Attorney's office has

never requested the BBB to do any

investigations, and no other govern-

mental agency has done so.

The Colorado Attorney General's

office has never investigated Walker's

-40-

and has never examined any of the BBB governmental agencies have ever assisted

investigatory material concerning the BBB in preparing cases submitted to

Prior to release of the panel's The Metropolitan District Attorney's

findings, there was no contact between Consumer Affairs Office in Denver

respondents and the Colorado Attorney receives numerous complaints from

General's office or the Denver District consumers. It does not attempt to

Attorney's office concerning Walker's. mediate disputes consumers and adver-

The flow of information is always tisers; rather, a large number of these

from the BBB to a requesting agency. complaints are determined not to involve

Neither the District Attorney's nor the criminal violations within a district

Attorney General's office provides the attorney's jurisdiction, and the com-

BBB with information concerning adver- plainants are referred to other public

tisers or with any other information and private agencies which may be

compiled during the course of investiga- available for assistance. These include

etene. the Consumer Protection Division of the

Other than the general endorsements Attorney General's office, the Motor

set forth above, there never has been Vehicle Division and other state regula-

any participation of government officials tory agencies, the BBB's arbitration

or employees in the formation or acti- board, other private consumer-oriented

vities of the Council or ARB, and no organizations, and the Denver County

-41- ~42=

Court. The consumer makes the deter-

mination. The District Attorney's

Office has never referred anyone to the

Council or ARB, and the BBB is included

as an alternative less than 10% of the

time.

The District Attorney's office has

never delegated any of its functions to

any of the respondents, has never

requested assistance from any of the

respondents on matters being handled by

it, and has never furnished respondents

information pertaining to such matters.

The Colorado Attorney General's

office does not refer complaints or

complainants to the BBB.

The other respondent organizations

and the other individual respondents,

with the exception of Bell, have not had

any contact whatsoever with state

agencies.

o43~

The ARB has no subpoena powers; no

authority to order anything or to

enforce its findings; has never been

requested by governmental authorities to

perform investigations; has never

received assistance of any kind from any

governmental authority; imposes no legal

sanctions; never represented that it had

legal jurisdiction over Walker's or that

Walker's was legally required to respond

to the ARB; and had no contact whatso-

ever with Ve-Ri-Tas. No state agency

has indicated that state authority was

behind the ARB procedures; and no

governmental agency has ever partici-

pated in any of the ARB activities.

Neither Ve-Ri-Tas nor Walker's was

in the business of, nor derived revenue

from, placing or producing advertising.

Moreover, there is no allegation or

showing in the record that the Council's

-44-

they were applied to petitioners for the

procedures, by design or effect, dis-

purpose of eliminating competitors of

criminate against advertisers which do

Garts in the weight loss business.

not place or produce their advertising

No member of the media and no

through ad agencies which are members of

supplier or other business has refused

the respondent organizations.

to deal with Walker's or Ve-Ri-Tas.

Petitioners do not compete with any

Ve-Ri-Tas does not claim that the

of the respondents or any members of the

respondents interfered with its manu-

corporate respondents. The only sug-

facture of machines, with its relation-

gestion by petitioners of competition

ship with the advertising agency which

with them is a vague reference to Gart

produced all ads for Ve-Ri-Tas' salons,

Brothers Sporting Goods Company, of

or with its lease operations, or that

which respondent Gart is president, to

any of the respondents induced Walker's

the effect that Garts sells exercise and

to breach any of the latter's agreements

weight loss equipment in competition .

with Ve-Ri-Tas. The president of

with petitioners. But Pat Walker

Ve-Ri-Tas testified that she did not

testified that the machines of Ve-Ri-Tas

know the nature of any injury to Ve-Ri-Tas

are not sold to the public. Even

or of any direct adverse effect on the

assuming competition between Garts and

trade or business of Ve-Ri-Tas.

the petitioners, there is no allegation

Walker's does not claim to have

or showing in the record that respondents’

been restrained by respondents in any

procedures were dictated by Gart or that

-46-

way in the placement of advertising; it

does not claim to have been restrained

in any way in the production of adver-

tising (nor does it produce advertis-

ing); it does not claim to have been

restrained in the mode and manner of

advertising by the respondents; it does

not claim to have been restrained in any

way in purchasing space in The Denver

Post and Rocky Mountain News, the major

local newspapers; it does not claim to

have been restrained in any way from

receiving slicks and copies from Ve-Ri-Tas.

Walker's never had any ads refused by

any of the media nor any requests for

modifications.

o47=

‘

“7

IV.

SUMMARY OF ARGUMENT

A. There is no symbiotic relation-

ship between respondents and any state

agency. The activ.ties of the ARB are

independent actions directed at adver-

tisers suspected of false and misleading

advertising. There is no state involve-

ment in any of the respondents' activities.

B. There is no close nexus

between respondents’ activities and any

state agency. The ARB has no enforce-

ment powers and makes no binding deter-

minations. Respondents simply exercise

their right of assembly and right of

free speech. They fulfill no public

function.

Cc. Petitioners were afforded

procedural due process. They were given

notice of the hearing and the claims and

were invited to participate. They

declined to do so.

-48-

D. The trial court was without

jurisdiction as to the Sherman Act

claims, and Ve-Ri-Tas had no standing to

sue.

E. There is no group boycott in

the activities of the respondents.

Respondents do not urge a boycott by

anyone and are not engaged in competi-

tion with petitioners. Respondents have

no anti-competitive motives. They

simply disseminate their views with

respect to false and misleading adver-

tising.

F. Respondents do not compete

with petitioners and have no anti-

competitive motives or intent to monopolize

with respect to petitioners. There has

been no anti-competitive combination

directed at petitioners.

G. There is no jurisdiction to

grant private relief under the Commerce

Clause.

-49-

ARGUMENT

Civil Rights Act

Symbiotic Relationship

Petitioners argue that the lower

courts have ignored the "symbiotic

relationship” state action test estab-

lished by the Court in Burton v.

Wilmington Parking Authority, 365 U.S.

715, 81S. Ct. 856, 6 L.Ed.2d 45 (1961)

and cite Gilmore v. City of Montgomery,

417 U.S. 556, 94 S. Ct. 2416, 41 L.Ed.2d

304 (1974) and United States v. Price,

383 U.S. 787, 86 S. Ct. 1152 (1966).

The United States District Court

for the District of Colorado and the

Tenth Circuit Court of Appeals did not

ignore the "symbiotic relationship"

test. It simply does not apply to this

-50-

case, which is dramatically distinguish-

able on the facts from the above cases.

This Court in Burton, supra,

characterized the relationship between

the Wilmington Parking Authority, a

public agency, and its private restaurant

lessee, which admittedly was engaging in

racial discrimination, as follows:

The state has so far insinuated

itself into a position of inter-

dependence with [the restaurant]

that it must be recognized as a

joint participant in the challenged

activity, which, on that account,

cannot be considered to have been

so ‘purely private’ as to fall

without the scope of the Four-

teenth Amendment.

365 U.S. at 725, 81 S. Ct. at 862.

The relationship between the

private restaurant and the state in

Burton, in which this Court found the

City of Wilmington and the restaurant to

be in effect joint venturers in the

restaurant's practice of excluding black

patrons from a restaurant operated under

@Sie

a leasing agreement in which the restau-

rant “operated as an integral part of a

public building (owned by the city)

devoted to a public parking service," is

certainly not akin to the relationship

in this case between the respondents

and any law enforcement agency.

Moreover, this Court in Jackson v.

Metropolitan Edison Company, 419 U.S.

345, 95 S. Ct. 449, 42 L.Ed.2d 477

(1974), in discussing Burton observed as

follows at p. 358 of 419 U.S.:

We cautioned, however, that ‘while

a multitude of relationships might

appear to some to fall within the

Amendment's embrace', differences

in circumstances beget differences

in law, limiting the actual holding

to lessees of public property.

In any event, there is no joint

participation (or interdependence) of

the defendants, or any one of them, with

the activities of any state agency.

=$2e

Rather, the contrary is the fact of

the matter. The District Attorney's

office had conducted its own independent

investigation of the Walker advertising,

and the filing of the criminal charges

against Walker's was the result of this

independent investigation. Indeed, the

record does not disclose any request by

the District Attorney's office to any of

the respondents to do anything. Cer-

tainly there was no delegation of any of

the District Attorney's authority,

responsibility, or functions. See

Williams v. United States, 341 U.S. 97,

71S. Ct. 576, 95 L.Ed. 775 (1951);

Gambino v. United States, 275 U.S. 310,

48 S. Ct. 137, 72 L.Ed. 293 (1927);

United States v. Davis, 482 F.2d 893

(9th Cir. 1973); Cornfeld v. United

States, 367 F.2d 1 (9th Cir. 1966).

Cooperation and receipt of information

~$ 30

from the BBB (note that the flow of

information is from the BBB; govern-

mental agencies do not reciprocate, and

the information is subject to subpoena

in any event) do ot constitute a

delegation of authority or responsi-

bility by a state agency.

The Gilmore and Price decisions are

as far removed from the facts before

this Court in this matter as those in

Burton. Gilmore was another discrimina-

tion case involving the use of public

park recreational facilities by private,

segregated school groups and by other

non-school groups which allegedly

discriminated in their membership on the

basis of race. As was noted at page 573

of 417 U.S. and page 2426 of 94 S. Ct.

as follows:

-54-

In contrast, here, as in Burton,

the question of the existence of

state action centers in the extent

of the city's involvement in dis-

criminatory actions by private

agencies using public facilities,

and in whether that involvement

makes the city ‘a joint participant

in the challenged activity, which,

on that account, cannot be con-

sidered to have been so "purely

private" as to fall without the

scope of the Fourteenth Amendment'

cof ee Because the city makes

city property available for use by

private entities, this case is more

like Burton than Moose Lodge. The

question then is whether there is

significant state involvement in

the private discrimination alleged.

Price, of course, involved the

question of whether or not certain

criminal indictments stated a charge

under the allegedly applicable civil

rights statutes. As noted in Price, at

page 795 of 383 U.S. and at page 1157 of

86 S. Ct.:

In the present case, according

to the indictment, the brutal joint

adventure was made possible by

state detention and calculated

release of the prisoners by an

officer of the State. This action,

Clearly attributable to the State,

was part of the monstrous design

-55-

described by the indictment. State

officers participated in every

phase of the alleged venture: the

release from jail, the intercep-

tion, assault and murder. It was a

joint activity, from start to

finish. Those who took advantage

of participation by state officers

in accomplishment of the foul

purpose alleged must suffer the

consequences of that participation.

In effect, if the allegations are

true, they were participants in

official lawlessness, acting in

willful concert with state officers

and hence under color of law.

Given the facts of the above cases,

and given the facts of this case, even

if one accepts the petitioners' characteri-

zation thereof, is it any wonder that

the courts below in applying the "sym-

biotic relationship" test reached a

conclusion that state action was not

involved in this matter? See Moose

Loe "e No. 107 v. Irvis, 407 U.S. 163, 92

S. Ct. 1965, 32 L.Ed.2d 627 (1972); Ward

v. St. Anthony Hospital, 476 F.2d 671,

675 (10th Cir. 1973); Browns v. Mitchell,

409 F.2d 593 (10th Cir. 1969).

-56-

Ironically, petitioners argue that

the respondents collectively have some

sort of enforcement power somehow magically

arising from their relationship with

governmental agencies and ignore the

fact that the activities of the respon-

dents as directed at Walker's accom-

plished nothing. Walker's ignored the

respondents’ procedures and continued to

advertise long after the cessation of

the activities of the respondents.

Public Function

Petitioners also argue a “public

function" state action test and cite

Marsh v. Alabama, 326 U.S. 501, 66 S. Ct.

276, 90 L.Ed. 265 (1946), and Hudgens v.

NLRB, 424 U.S. 507, 96 S. Ct. 1029, 47

L.Ed.2d 196 (1976). They argue that

respondents have assumed governmental

powers and exercise a uniquely govern-

mental function by privately enforcing

-5J=

ORE,

RT TN

federal, state and local criminal and

civil laws. This is nonsense. The ARB

clearly has no jurisdiction over anyone,

and neither the ARB nor any of the

respondents has any power to enforce

views or to impose sanctions. It cer-

tainly does not purport or attempt to

enforce any laws. Compare Ford v.

Harris County Medical Society, 535 F.2d

321 (5th Cir. 1976) (no power to issue,

suspend, revoke, or otherwise affect

licensing of doctors) with Evans v.

Newton, 382 U.S. 296, 86 S. Ct. 486, 15

L.Ed.2d 373 (1966) (private property used

and maintained by city as municipal

park), and Terry v. Adams, 345 U.S. 461,

73 S. Ct. 809, 97 L.Ed. 1152 (1953) (de

facto delegation of primary election

process to private organization).

In Jackson v. Metropolitan Edison

Company, supra, in which a heavily

regulated utility with a partial mono-

poly terminated service of a customer

who sought an injunction requiring

continuance of electrical power to her

residence until notice, a hearing, and

an opportunity to pay the amounts due,

this Court has rejected the broad

proposition that all activities "affected

with the public interest" involve the

state, and declined to expand the

"public function" doctrine. In Jackson,

this Court enunciated the inquiry as

follows:

[T]he inquiry must be whether there

is a sufficiently close nexus

between the State and the chal-

lenged action of the regulated

entity so that the action of the

latter may be fairly treated as

that of the State itself.

419 U.S. at 351, 95 S. Ct. at 453. The

public function doctrine was even further

-59-

limited in Hudgens v. NLRB, supra,

holding no First Amendment right to enter

a shopping center for the purpose of

advertising a labor union strike in that

there had been no dedication to public

use.

Conceding that respondents attempted

to act in the public interest, they make

no binding determinations of anyone's

rights and do not employ or purport to

employ any of the powers used by the

state to enforce such determinations;

indeed they could not do so. The ARB

simply exercises its right of free

speech, which is not the sole domain of

the petitioners whose advertising is the

subject of the speech.

In short, there is no state

involvement in respondents' activities

and no close nexus therewith. To

overcome this defect in their civil

-60-

rights claim, petitioners advance a novel

theory. Stripped of rhetoric, petitioners’

argument is that the respondents' self-

regulatory mechanism is effective in

bringing about voluntary correction of

questioned advertising practices because

their procedures prescribe the sanction

of calling the ARB's findings concerning

advertising practices to the attention of

law enforcement authorities (in addition

to the general public). Although appar-

ently admitting that respondents do not

and cannot influence the decision to

institute criminal proceedings, petition-

ers argue that respondents’ acts are

"state action" because some people may

believe that prosecution is likely to

follow an adverse decision by the ARB.

The same kind of effectiveness has been

achieved by newspapers and other consumer

oriented organizations which call the

attention of law enforcement authorities

and the general public to shoddy and

misleading business and advertising prac-

tices or provide information to law

enforcement agencies. However, the

effectiveness of otherwise private

conduct is not determinative of whether

state action is present. See Shelley v.

Kraemer, 334 U.S. 1, 68 S. Ct. 836, 92

L.Ed. 1161 (1948).

There has been no participation by

the State of Colorado or any political

subdivision, agent, employee, or muni-

cipality thereof, in the acts by which

any of the respondents have allegedly

deprived the petitioners of their civil

rights. There was no involvement of the

state in any form with the BBB‘'s investi-

gation of Walker's advertising or in the

actions taken by the BBB or the ARB with

respect thereto.

@62=

Suzanne H. Lynch, Deputy District

Attorney assigned to the Metropolitan

District Attorney's Consumer Affairs

office, over and over emphasized and

reemphasized in her deposition the

concept that the Denver District Attorney's

office in no way or manner utilized the

BBB, the Council, the ARB, or any of the

individual respondents to discharge any

duties or responsibilities of the District

Attorney's office.

Mrs. Lynch's testimony is emphatic

and consistent. For example:

Q (By Mr. Hertzberg) Do you know

whether your office has ever

requested the Better Business Bureau

or any of its agents, servants or

employees, to do any investigation

on your behalf other than merely

deliver files?

A Never.

Q Not to your knowledge?

A To my knowledge, never.

=€3<

Se & ¢

Q (By Mr. Phillips) Have you

ever asked any of those people or

entities to perform any of your

duties?

A Never.

Q To your knowledge, has the

District Attorney's office ever

asked those entities or individuals

to perform duties of the District

Attorney's office?

A Never.

Q Have you asked those individuals

or entities to hold hearings with

respect to Pat Walker's?

A Never.

Q With respect to Ve-Ri-Tas,

Inc.?

A Never.

Q Did you ever direct any of

these individuals or entities to

investigate Pat Walker's?

A No.

Q To investigate Ve-Ri-Tas?

A No.

Q Have you ever asked anybody

else to investigate Pat Walker's or

Ve-Ri-Tas?

-64-

A Yes.

Q Outside your office?

A No.

x *

Q (By Mr. Phillips] Have you

ever commissioned the Better

Business Bureau to arbitrate any

matters which had come to your

office?

A No.

x *« &

Q (By Mr. Phillips) Did you

ever provide any information to any

of these defendants from your files

with respect to Pat Walker's

advertising?

A No, sir.

Se © @

Q [By Mr. Phillips] Did your

office provide the Advertising

Review Board with any assistance

whatsoever with respect to the

matters which you read about in the

newspapers?

A Not to my knowledge.

x *

Q [By Mr. Phillips] Has your

office ever provided any assistance

or information to the Advertising

Review Board with respect to any

advertisers?

=65<

A Not to my knowledge.

Q Do you feel that any one or

all of the defendants in this case

have insinuated themselves into a

position of interdependence so that

they must be recognized as a joint

participant in the activities of

the District Attorney's office?

A No, sir.

x *

Q [By Mr. Phillips] Does the

Better Business Bureau systematically

prepare and deliver to your office

information that is gathered from

investigations of businesses or

what have you?

A To my knowledge, no.

Q Does the Better Business

Bureau act as a screening service

for yc r office?

a No, unfortunately.

Q Is any one or more of the

defendants acting as agents of your

office?

A None of them have ever acted

as agents for our office.

* * *

Q [By Mr. Hertzberg] Your

answers to Mr. Phillips, he asked

you whether you would deliver or

-66-

transmit information in your files,

statements in your files of wit-

nesses, to anybody other than the

defendant in this case; and you

said you would not.

A I absolutely would not.

Q And as a matter or practice

you don't do that?

A As a matter of practice we

don't tell anybody what's in our

files, Mr. Hertzberg.

Q It is confidential; is it not?

A Absolutely.

General endorsement of the Council's

self-regulatory goals by the Colorado

Attorney General's office and the Metro-

politan Denver Consumer Affairs Office

obviously does not rise to that level of

state participation in the acts of the

respondents directed toward the petition-

ers required to sustain a civil rights

violation.

Petitioners rely on the case of

American Mercury, Inc. v. Chase, 13 F.2d

@67=

224 (D. Mass. 1926). American Mercury

has nothing to do with Section 1983. It

was a suit by American Mercury, Inc.,

publisher of a magazine entitled American

Mercury, to enjoin the defendant society's

practice of notifying the plaintiffs'

distributors that sale or distribution of

the magazine would result in prosecution

by the defendants. In practice, the

society did initiate criminal complaints

whenever such warnings were not heeded.

The cases cited by the Court (at p. 225

of 13 F.2d) in support of the issuance of

an injunction apply the common-law

principle, analogous to the antitrust

laws, that a combination of persons who

conspire to destroy a plaintiff's busi-

ness by bringing to bear on his customers

threats of prosecution or other coercive

means to cause them to refuse to deal

with the plaintiff's product, is illegal,

-68-

regardless of defendant's motives. As

stated by the Court at p. 225 of F.2d:

"The principles of law involved... are

analogous to those under which secondary

boycotts are illegal... ."

In the case at hand, the respondents

do not threaten to, and do not, initiate

criminal prosecutions. They do communi-

cate to subject advertisers that law

enforcement authorities may be notified

of their opinions concerning advertising

claims, but such notification is directed

only to the advertiser and not to any of

his customers. Most importantly, in this

case there has been no coerced boycott or

refusal to deal with petitioners.

Due Process

With respect to “procedural due

process," respondents submit that under

any standards the ARB procedures meet the

test. See Hannah v. Larche, 363 U.S.

420, 80 S. Ct. 1502, 4 L.Ed.2d 1307

(1960); Garvey v. Freeman, 397 F.2d 600

(10th Cir. 1968); Hyser v. Reed, 318

F.2d 225 (D.C. Cir. 1963), cert. denied,

375 U.S. 957, 84 S. Ct. 446, 11 L.Ed.2d

315 (1963); Sigma Chi Fraternity v.

Regents of the University of Colorado,

258 F. Supp. 515 (D. Colo. 1966).

An examination of the ARB's "State-

ment of Organization and Procedures"

reveals a determined effort by the ARC

and ARB to discharge any duty or moral

obligation of fairness to subject

advertisers. An examination of the

record will show that these procedures

were followed in all material respects.

Ten days’ notice of the panel's meeting

is required, and Walker's was given more

than ten days’ notice. A synopsis of

the material to be presented to the

panel was delivered to Walker's the day

-70-

before the hearing. The meeting was

scheduled before an impartial panel

before which Walker's and its counsel

could have heard the evidence being

presented, confronted witnesses, cross-

examined parties appearing before the

panel, introduced its own evidence, made

arguments, and fully presented its side

of the dispute.

As set forth by Judge Doyle in

Sigma Chi Fraternity v. Regents of the

University of Colorado, supra, an action

for injunctive relief to prohibit the

Regents from placing a fraternity on

probation without procedural due process,

at p. 528:

The test as to whether a party has

been afforded procedural due

process is one of ‘fundamental

fairness’ in the light of the total

circumstances. It has been said

that the due process clause of the

Fifth Amendment does not guarantee

any particular mode of procedure

aFle

but that it does require adequate

notice of opposing claims, reason-

able opportunity to prepare and

meet them in an orderly hearing

adapted to the nature of the case

and finally, a fair and impartial

decision...

The requirements of notice and of a

fair and impartial hearing mean

that the parties must be given a

fair opportunity to present their

positions ....

The Board's procedures are more

than adequate under the foregoing tests.

See Hannah v. Larche, supra; Garvey v.

Freeman, supra.

Most importantly, petitioners did

not avail themselves of the opportunity

they were afforded by respondents’

procedures to review the evidence

against them, to participate in the

hearing, and to formulate a public

statement about the findings of the

panel. As observed by the trial court

at p. 1018 of 411 F. Supp: "Where, as

o720

here, the plaintiffs have made no effort

to use the processes available to them,

they can hardly be claiming to be

injured because not more was available."

The procedural and substantive

processes afforded petitioners were more

than adequate in view of the nature of

the forum and the limited, noncriminal

sanction (adverse publicity) involved.

See Garvey v. Freeman, supra; Hyser v.

Reed, supra.

Sherman Act

With respect to the Sherman Act

claims, respondents strenuously argue

that there was no jurisdiction in the

trial court below and that petitioner

Ve-Ri-Tas had no standing to sue.

o73<

Jurisdiction

Section 1 of the Sherman Act (15

U.S.C. § 1 (1974)) provides that every

contract, combination in the form of

trust or otherwise, or conspiracy, in

restraint of trade or commerce among the

several states, is illegal.

Section 2 of the Sherman Act (15

U.S.C. § 2 (1974)) condemns "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

commerce among the several states."

(Emphasis added.)

As an element of jurisdiction, as

well as of the offense, under both of

these sections, the petitioners had to

show that the alleged restraint of trade

occurs in the flow cf interstate com-

merce, or that the restraint has a

@F4a

substantial effect on interstate com-

merce. Although Judge Matsch did not

rule upon this point raised by respon-

dents’ motions, the record shows that

the trial court did not have jurisdic-

tion of the petitioners’ claims under

Sections 1 and 2 of the Sherman Act.

The restraint of trade, if any,

involved in this case is placed upon the

business conducted by Walker's,” which

Operates one figure perfection salon in

Englewood, Colorado, and which competes

in the reducing salon market in the

Denver area. Walker's has enjoyed no

out-of-state patronage (with the excep-

tion of a solitary customer), and its

In serious issue arises as to whether or

not Ve-Ri-Tas even has standing to sue.

See Billy Baxter, Inc. v. Coca-Cola Co.,

431 F.2d 183 (2d Cir. 1970), cert.

denied, 401 U.S. 923, 91 S. Ct. 877, 28

L.Ed.2d 553 (1971).

-75-

business is obviously local in charac-

ter. See Sun Valley Disposal Co. v.

Silver State Disposal Co., 420 F.2d 341

(9th Cir. 1969); Lieberthal v. North

Country Lanes, Inc., 332 F.2d 269 (2d

Cir. 1964); Page v. Work, 290 F.2d 323

(9th Cir. 1961); Elizabeth Hospital,

Inc. v. Richardson, 269 F.2d 167 (8th

Cir. 1959); Riggall v. Washington County

Medical Society, 249 F.2d 266 (8th Cir.

1957); Spears Free Clinic and Hospital

v. Cleere, 197 F.2d 125 (10th Cir.

1952); Kallen v. Nexus Corporation, 353

F. Supp. 33 (N.D. Ill. 1973); John Kalin

Funeral Home, Inc. v. Fultz, 313 F.

Supp. 435 (W.D. Wash. 1970), aff'd, 442

F.2d 1342 (9th Cir. 1971).

Walker's does receive advertising

copy through channels of interstate

commerce upon request although it pays

no consideration therefor, and it

oF6~

F.2d 901 (10th Cir. 1967), rev'd on

purchases space for such advertising

other grounds, 389 U.S. 320, 88 S. Ct.

copy in local newspapers, which are

443, 19 L.Ed.2d 554 (1968); Brosious v.

likewise distributed through channels of

Pepsi-Cola Co., 155 F.2d 99 (3d Cir.

interstate commerce. However, if there

1946); Bailey's Bakery Ltd. v. Continental

is any "commerce" in advertising copy

Baking Co., 235 F. Supp. 705 (D. Hawaii

before it reaches Walker's in Denver, aa See ” ,

1964).

such flow of commerce ends at this point

Although Walker's business may

as Walker's is the ultimate consumer of

involve some interstate distribution by

the advertising copy. Walker's does not

Ve-Ri-Tas of advertising materials,

in any manner engage in the business of

equipment, supplies, know-how and the

placing or producing advertising (nor

like, all are purely incidental, not

does Ve-Ri-Tas). The subsequent local

directly related to, and not the least

sale of advertising space by newspapers

bit affected by, respondents’ activities.

to Walker's and the subsequent inter-

An incidental effect is quite clearly

state sale of newspapers carrying the

insufficient to confer jurisdiction, and

Walker's ads are severable transactions,

here the effect is not even incidental.

and the latter commerce is not subject

See Lieberthal v. North Country Lanes,

to, or in any way affected by, the

supra; Page v. Work, supra; Foster &

alleged restraint. The alleged restraint

Kleiser Co. v. Special Site Sign Co.,

does not occur "in the flow of" inter-

85 F.2d 742 (9th Cir. 1936).

state commerce. See Burke v. Ford, 377

»J@o

@77=

Petitioners would predicate juris-

diction on the fact that in accordance

with respondents' written Statement of

Organization and Procedures the ARB may

review complaints relating to "regional"

as well as “local” advertisers; ergo,

petitioners allege, respondents" acti-

vities are "not confined to the censor-

ship of advertisements orginating in and

intended solely for local markets." In

other words, petitioners would predicate

jurisdiction on the hypothetical effect

of respondents' procedures on the trade

conducted by unspecified merchants who

do business in unspecified markets. The

Court should note that the Walker's

matter was the first and only matter

ever considered by a panel of the ARB.

That respondents’ procedures may be

applied to "regional advertisers" which

engage in businesses unrelated to that

~~;

of petitioners does not afford a basis

for jurisdiction of an alleged restraint

of Walker's local figure perfection

business. Obviously, the jurisdictional

basis for the complaint must be factual

and not hypothetical. To meet the

jurisdictional requirements of the

Sherman Act, plaintiffs must allege

facts showing the precise manner in

which the alleged restraint substan-

tially affects interstate commerce. See

United States v. Starlite Drive-In, 204

F.2d 419 (7th Cir. 1953). This the

petitioners failed to do by way of

pleading or otherwise.

Fashion Originators' Guild

Petitioners’ Section 1 argument

rests on Fashion Originators’ Guild of

America v. Federal Trade Commission, 312

U.S. 457, 61S. Ct. 703, 85 L.Ed. 949

-80-

(1941).

Once again, the facts are dispositive

of this issue. Fashion Originators'

Guild involved a group boycott entered

into for the purposes of eliminating

competition by exertion of a concerted

refusal to deal. Clearly, this is a per

se violation of the Sherman Act, but in

the case at hand there is no group

boycott aspect to the activities of

these respondents.

Fashion Originators’ Guild involved

a trade association of original dress

designers and fabric pattern manufac-

turers which had endeavored to destroy

competition from “style pirates" who

copied designs and sold them at lower

prices. This goal was accomplished

pursuant to a conspiracy to boycott all

retailers which purchased goods from the

"pirate" manufacturers. The association

-81-

had set up an intricate trial and

appellate process for determining which

manufacturers had violated the agree-

ment. It was not the procedures,

however, that concerned this Court; it

was the endavehnant mechanism, i.e., the

group boycott, which the Court found to

be a per se violation.

By no stretch of the imagination is

the September 12, 1974, press release of

the respondents herein the equivalent of

the group boycott in the foregoing case.

Compare Radiant Burners, Inc. v. People's

Gas, Light and Coke Co., 364 U.S. 656,

81S. Ct. 365, 52 L.Ed.2d 358 (1961) and

Eastern States Lumber Dealers Association

v. United States, 234 U.S. 600, 34 S. Ct.

951, 58 L.Ed. 1490 (1914).

In the case of Sugar Institute v.

United States, 297 U.S. 553, 56 S. Ct.

629, 80 L.Ed. 859 (1936), this Court

issued its important dictum to the

@$2=

effect that reasonable “self-regulation”

by trade associations does not violate

the antitrust laws (where no boycott or

other per se violation is involved) when

such practices are designed to mitigate

recognized evils in a trade. As stated

not to be condemned as an undue

restraint merely because it may

effect a change in market condi-

tions where the change would be in

mitigation of recognized evils and

would not impair, but rather

foster, fair competitive oppor-

tunities . . . Further, the dis-

semination of information is normally

an Aid to commerce. As free compe-

by this Court in 297 U.S. at 597-598:

Designed to frustrate unreasonable

restraints, they [the antitrust

laws] do not prevent the adoption

of reasonable means to protect

interstate commerce from destruc-

tive or injurious practices and to

promote competition upon a sound

basis. Voluntary action to end

abuses and to foster fair com-

petitive opportunities in the

public interest may be more effec-

tive than legal processes. And

cooperative endeavor may appro-

priately have wider objectives than

merely the removal of evils, which

are infractions of positive law.

Nor does the fact that correction

of abuses may tend to stabilize a

business, or to produce fairer

price levels, require that abuses

should go uncorrected or that an

effort to correct them should for

that reason alone be stamped as an

unreasonable restraint of trade.

Accordingly, we have held that a

cooperative enterprise otherwise

free from objection, which carries

with it no monopolistic menace, is

-83-

tition means a free and open market

among both buyers and sellers, compe-

tition does not become less free

merely because of the distribution

of knowledge of the essential

factors entering into commercial

transactions. The natural effect

of the acquisition of the wider and

more scientific knowledge of

business conditions on the minds of

those engaged in commerce, and the

consequent stabilizing of produc-

tion and price, cannot be said to

be an unreasonable restraint or in

any respect unlawful.

(Emphasis added.)

Although the foregoing language was

written with respect to an alleged price

fixing conspiracy involving circulation

of pricing information, it has obvious

applicability to the present case. The

mere dissemination of information

critical to petitioners’ advertising is

-84-

not a violation of the antitrust laws. Business Bureau had conspired to drive

Rather, the right to disseminate such him out of business by publishing

information is essential to a free and "letters and leaflets that he was a

open market and is protected by the person unreliable morally and finan-

First Amendment. If the antitrust laws cially, with a record of criminal

were to be read so broadly as to pre- convictions." There, Judge Learned Hand

clude fair comment on the content of said, at p. 912 of 107 F.2d, as follows:

Moreover, if what the Bureau did say

about he plaintiff was true, it was

not guilty anyway, not because truth

is a defense in such actions, but

because in this particular case

there was no other evidence to

support a verdict. To be actionable

the combination or agreement must be

unlawful in means, or in end; the

only unlawful means possible were

the utterances about the plaintiff,

the truth of which the judge did

leave to the jury. The end avowed --

ridding the business of unscrupulous

persons -- was not only lawful, but

commendable, and while the defendants

may have had other motives, that had

to be proved and could not be

assumed. To spread abroad what it

had learned did not tend to show

that its true purpose was not what

it avowed, if the facts were so;

indeed the Bureau would have been

recreant to its duty, if it had

suppressed the information, which,

rima facie at least, showed the

plaintiff to be unfit for business.

advertising material, they would infringe

upon the respondents’ First Amendment

rights. See United Mine Workers of

America v. Pennington, 381 U.S. 657, 85

S. Ct. 1585, 14 L.Ed.2d 626 (1965);

Eastern Railroad Presidents Conference

v. Noerr Motor Freight Inc., 365 U.S.

127, 81 S. Ct. 523, 5 L.Ed.2d 464 (1961).

The present case is quite comparable

to McCann v. New York Stock Exchange,

107 F.2d 908 (2d Cir. 1939), an action

under the antitrust laws in which the

plaintiff claimed that the New York

Stock Exchange and the New York Better

-85-

-86-

And, as Judge Matsch found in the instant

case, at p. 1019 of 411 F. Supp.:

There is no proof of such other

motive in this case. Indeed, in my

view the Pat Walker advertising was

misleading because of its failure to

tell the whole truth. The discovery

record supports the characteriza-

tions and conclusions made by the

defendants.

In this case there is nothing in the

record indicating a conspiracy or conduct

calculated either to exclude the peti-

tioners from any market or to accomplish

any other anti-competitive objective.

There has been no conspiracy and no

attempt by respondents or any of them to

persuade anyone to refuse to deal with

Walker's (or Ve-Ri-Tas); and there has

been no refusal to transact business with

petitioners by customers, the media,

advertising agencies, suppliers, or

others dealing with petitioners. There

is nothing even suggesting that the

Fashion Originators’ Guild case, which

@8Jo

involved a group refusal to deal, applies

to the facts in this case.

Petitioners argue that the respon-

dents’ attempts to eliminate deceptive

advertising practices and their conduct

in issuing public statements concerning

advertisements are calculated to cause

members of the public to boycott Walker's.

However, the content of the respondents’

press release and the accompanying

statement make it clear that respondents,

and particularly the ARB, which issued

the press release, did nothing more than

objectively detail to the public their

findings concerning Walker's advertising.

Absent an anti-competitive motive, which

is absent in this case, reasonable

activities are not actionable under the

Sherman Act even though their incidental

effect may be to cause Walker's a loss of

patronage. See Bridge Corporation of

America v. American Contract Bridge

League, Inc., 428 F.2d 1365 (9th Cir.

1970), cert. denied, 401 U.S. 940, 91

S. Ct. 940, 28 L.Ed.2d 220 (1971) (in-

direct effect on bridge competition) ;

Joseph E. Seagram and Sons, Inc. v.

Hawaiian Oke and Liguors, Ltd., 416 F.2d

71 (9th Cir. 1969), cert. denied, 396

U.S. 1062, 90 S. Ct. 752, 24 L.Ed.2d 755

(1970) (no anti-competitive motive or

causation).

Petitioners repeatedly refer to the

treatment of nonmembers by the BBB. The

significance is unclear. The BBB is not

an organization of competitors, or

persons interested in any particular line

of trade, but is made up of myriad and

unrelated types of businesses. Moreover,

there is not the slightest indication in

the record that the disparity in treat-

ment, if any, is based on any anti-

competitive purpose, or, for that matter,

-39-

that there is any resulting anti-competitive

effect. See Deesen v. Professional

Golfers' Association of America, 358 F.2d

165 (9th Cir. 1966), cert. denied, 385

U.S. 846, 87 S. Ct. 74, 17 L.Ed.2d 76

(1967); Syracuse Broadcasting Corp. v.

Newhouse, 319 F.2d 683 (2d Cir. 1963)

(publication of truthful reports of

financial difficulties no way indicative

of conspiracy).

Section 2

Petitioners’ Section 2 claim boils

down to an assertion that substantially

all of the members of the Ad Club, and a

limited number of the members of the

other respondent organizations, consists

of most, if not all, of the advertising

producers in the Denver metropolitan

area.

Mere collective strength in the

advertising production market, however,

does not establish the offense of

-90-

monopolization. There is no allegation

or indication in the record that the

respondents, by the alleged combination,

discriminate in any way against nonmember

producers of advertising copy or out-of-

state producers of advertising copy in

any way, or that the alleged combination

is calculated or intended to eliminate

competition in the advertising production

business. Petitioners’ claim under

Section 2 fails as a matter of law. See

Deesen v. Professional Golfers Association

of America, supra; District of Columbia

Citizen Publishing Co. v. Merchants

Manufacturing Co., 83 F. Supp. 994

(D.D.C. 1949).

Petitioners also stress that member-

ship of the respondent organizations,

consisting of a cross-section of Denver

businesses, includes sporting goods

stores which sell exercising equipment,

-9l-

and physicians and drug stores, which

dispense diet pills. These concerns,

petitioners contend, would have an

"interest" in eliminating Walker's,

which offers reducing services, from the

Denver market. Accepting this very

tenuous proposition as true, petitioners

nevertheless do not allege or show that

the instigation or outcome of the

proceedings against Walker's were in any

way dictated by businesses which compete

with either of the petitioners. The

fact that a handful of the members of

the respondent organizations may be

indirect competitors of the petitioners

is not an antitrust violation, absent a

conspiracy on the part of such persons

to eliminate their competitors from the

market and to use the respondents’

procedures to do so. No such anti-

competitive combination has been alleged

=9 20

or shown by the petitioners. See

Roofire Alarm Co. v. Royal Indemnity

Company, 202 F. Supp. 166 (E.D. Tenn.

1962), aff'd, 313 F.2d 635 (6th Cir.

1963).

Commerce Clause

See opinion below at 411 F. Supp.

1012, 1019 (D. Colo. 1976).

VI.

CONCLUSION

None of the considerations set

forth in this Court's Rule 19 have been

met. No new important question of

federal law arises, and the Tenth

Circuit has not decided any federal

questions in any way conflicting with

applicable decisions of this Court.

Rather, the facts simply do not support

petitioners' strained interpretations

-93-

and efforts to apply various standards

and tests to respondents' activities.

John D. Phillips, Jr.

Thomas B. Kelley

YEGGE, HALL & EVANS

1340 Denver Club Building

518 17th Street

Denver, Colorado 80202

(303) 573-5022

Attorneys for Respondents

CERTIFICATE OF SERVCICE

I do hereby certify that I am

counsel for the Respondents, a member of

the bar of the Supreme Court of the

United States, and that I have this

27 day of April, 1978, served the

foregoing Brief of Respondents by

depositing copies thereof in the U.S.

Mail, at Denver, Colorado, air mail,

postage prepaid, addressed to counsel

for Petitioners, as follows:

Robert C. Hawley, Esq.

Ireland, Stapleton, Pryor & Holmes

1700 Broadway, #2017

Denver, Colorado 80264

David S. Koslow, Esq.

Hertzberg, Kaplan & Koslow

3550 Wilshire ulevard, #1418

‘Calzfornia 90010

Los Angeles

TAA EY

LAT =>

f /| a: 4

-94-

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.