Petition — Safecard Services, Inc. v. Dow Jones & Co.

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Office - Supre

FIL re U.S.

JUN 29 1983

ALEXANDerS , oe

SUPREME COURT OF THE UN{TED STATES “VAS.

ree

October Term, 1982

No.

SAFECARD SERVICES, INC.

Petitioner,

Vv.

DOW JONES AND COMPANY, INC.

ALAN ABELSON and STEVEN ANREDER,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO

THE FOURTH CIRCUIT COURT OF APPEALS

HUGO L. BLACK, JR.

KELLY, BLACK, BLACK, EARLE & PATCHEN

1400 Alfred I. duPont Building

169 East Flagler Street

Miami, Florida 33131

(305) 358-5700

QUESTIONS PRESENTED

1. Whether the protective shield of the

unique fact-finding process established in

this Court's First Amendment opinions in

libel cases against the media, beginning

with New York Times v. Sullivan, 376

U.S. 254, 84 S.Ct. 710, 11 L.Ed. 2d 684

(1964), extends to suits against the press

on other causes of action such as S.E.C.

Regulation 10b-5 actions for market

manipulation.

A. Whether in a market manipulation

case brought under S.E.C. Regulation

10b-5 against the press the issue of

whether an untrue statement is one of fact

or opinion is an issue of law or an issue of

fact.

B. Whether in a market manipulation

case brought under S.E.C. Regulation

10b-5 against the media the issue of the

materiality of an admitted untruth is an

issue of law or an issue of fact.

LIST OF PARTIES TO THE PROCEEDING

SafeCard Services, Inc.

Dow Jones & Company, Inc.

Credit Card Services Corporation

Alan Abelson

Steven Anreder

John P. Ferry

Walter Hurney

Kelly, Black, Black, Earle &

Patchen, P.A., Attorneys for

SafeCard Services, Inc.

Lewis, Wilson, Lewis and Jones, Ltd.,

Attorneys for SafeCard Services, Inc.

Thomas & Sewell, P.C., Attorneys for

Credit Card Service Corporation,

John P. Ferry and Walter Hurney

Patterson, Belknap, Webb & Tyler,

Attorneys for Dow Jones & Company,

Inc., Alan Abelson and Steven

Anreder

III

TABLE OF CONTENTS AND AUTHORITIES

CONTENTS

Page

* QUESTIONS PRESENTED 1

II. LIST OF PARTIES TO THE

PROCEEDING 3

III. TABLE OF CONTENTS AND

AUTHORITIES 4

IV. OFFICIAL AND UNOFFICIAL

REPORTS OF OPINIONS BELOW 6

V. JURISDICTION 7

VI. CONSTITUTIONAL PROVISIONS,

STATUTES, AND REGULATIONS

INVOLVED 8

VII. STATEMENT OF THE CASE 11

VIII. REASONS FOR GRANTING THE

WRIT 23

APPENDIX 28

AUTHORITIES

Cases

Bose v. Consumers i SLAY

oO. p ’

New York Times v. Sullivan,

. . , . Za >

11 L.Ed.2d 684 (1964)

Constitutional Provisions

Constitution of the United States

Amendment I

Statutes

15 U.S.C. §78j

S.E.C. Rule 10b-5

1,23-25

OFFICIAL AND UNOFFICIAL

REPORTS OF OPINIONS BELOW

Res SafeCard Services, Inc. v. Dow Jones

& Co., Inc., 50? F.Supp. 1137 (E.D.Va.

2. SafeCard Services, Inc. v. Dow Jones

and Company, Inc., Credit Card Services

a TF Alan Abelson, Steven Anreder,

ohn P, ory alter Hurney, Case No.

- ; SafeCar ervices, Inc. v. Dow

Jones and Company, Inc., Alan Abelson,

Steven Anreder, and Credit Card Services

Corp., John P. Ferry, Walter Hurney,

Case No. 82-1528. (Unpublished). (A.

47).

JURISDICTION

The date of the Judgment of the

Fourth Circuit Court of Appeals from

which this appeal is taken is March 31,

1983. No petition for rehearing was made.

This Petition for Certiorari was filed within

ninety (90) days of the date of the Judg-

ment of the Fourth Circuit Court of

Appeals. This Court's jurisdiction is

invoked under 28 U.S.C. §1254(1).

CONSTITUTIONAL PROVISIONS,

STATUTES, AND REGULATIONS INVOLVED

Constitution of the United States, Amend-

ment |

Congress shall make no law respecting

an establishment of religion, or prohibiting

the free exercise thereof; or abridging the

freedom of speech, or of the press; or the

right of the people peaceably to assemble,

and to petition the Government for a

redress of grievances.

15 U.S.C. $78)

It shall be unlawful for any person,

directly or indirectly, by the use of any

means or instrumentality of interstate

commerce or of the mails, or of any facility

of any national securities exchange -

(b) To use or employ, in connection

with the purchase or sale of any security

registered on a _ national securities ex-

change or any security not so registered,

any manipulative or deceptive device or

contrivance in contravention of such rules

and regulations as the Commission may

prescribe as necessary or appropriate in

the public interest or for the protection of

investors.

Securities Exchange Commission Rule 10b-5

It shall be unlawful for any person,

directly or indirectly, by the use of any

means or instrumentality of interstate

commerce, or of the mails, or of any

facility of any national securities exchange

(a) To employ any device, scheme,

or artifice to defraud,

(b) To make any untrue statement of

a material fact or to omit to state a mate-

rial fact necessary in order to make the

statements made, in the light of the

circumstances under which they’ were

made, not misleading, or

or course of business which operates or

would operate as a fraud or deceit upon

any person, in connection with the pur-

chase or sale of any security.

VII

STATEMENT OF THE CASE

This action was instituted by Safe-

Card Services, Inc. (hereinafter "Safe-

Card") against the defendants for violation

of S.E.C. Rule 10b-5, Sections 1 and 2 of

the Sherman Act, and applicable State law.

This Petition for Certiorari seeks to

upset the affirmance by the Fourth Circuit

of a final summary judgment granted in

favor of the defendants, Dow Jones and

Company, Inc., Alan Abelson and Steven

Anreder (hereinafter "Dow Jones defen-

dants") and against SafeCard by the

Honorable Richard L. Williams of the

Eastern District of Virginia. Judge

Williams also granted a partial summary

judgment in favor of defendants Credit

Card Service Corporation, John P. Ferry

and Walter Hurney (hereinafter "CCSC

defendants") and against the plaintiff

SafeCard. The memorandum Opinion of

Judge Williams is published at 537 F.Supp.

1137. Judge Williams rendered the judg-

ment appealed from on Thursday, April 29,

1982, the eve of the trial scheduled for

May 3, 1982. The parties thereupon

stipulated to a dismissal without prejudice

of what was left of the case under Federal

Rule of Civil Procedure 41(a)(ii); the

court entered an Order dismissing the

remainder of the case without prejudice on

April 29, 1982. The appeal followed on

May 19, 1982. The Fourth Circuit on

March 31, 1983 affirmed, adopting Judge

Williams' opinion as its own.

SafeCard is a small public company

principally in the credit card registration

business whose stock sells over-the-

counter. For years SafeCard's stock and

business had taken a financial battering

from a deadly combination of the editors of

Barrons, a weekly financial magazine

published by the defendant Dow Jones and

Company, Inc. (hereinafter "Dow Jones"),

and those who control SafeCard's only real

competitor Credit Card Services Corpo-

ration (hereinafter "CCSC"). The defen-

dant Alan Abelson (hereinafter "Abelson"),

now the Managing Editor of Barrons, and

John P. Ferry’ (hereinafter "Ferry"),

Chairman of the Board and chief executive

officer of CCSC, admittedly shared an all-

consuming hatred of Peter Halmos (herein-

after "Halmos"), SafeCard's Chairman of

the Board, inspiring each man with a

messianic, self-righteous zeal to bring

Halmos and his SafeCard down. Thus, to

Abelson, within earshot of a court reporter

in this case, Halmos is, among other

species of rascality, a "phony" and a

"nut" and a "despicable person" who

"obviously wants to throttle the press .

. hates criticism . . . [and] . . . doesn't

understand the institutions of this country

at all." Said Abelson, "I think . .. the

tenor and temper of [Peter Halmos']

communications to us would certainly

suggest that clinical help would not be out

of line in this case."

Equal to Abelson in his hatred of

Halmos is Ferry, Chairman of the Board

and chief executive officer of CCSC,

SafeCard's principal competitor. In _ the

words of a former CCSC Director and

Marketing Manager, "Ferry has always

been overly concerned about SafeCard."

Ferry was "terribly concerned, over-

concerned, unduly concerned, but I don't

think I can use the term paranoia. Semi-

obsessed, I will go that far with you."

Like Abelson of Barrons, Ferry feels that

Halmos "is a very sick individual and

needs professional help" with "a deranged

mind" who "rips off the public".

So in the spring of 1978 the people at

Barrons, proclaiming that SafeCard's stock

was "“hyper-inflated" and the people of

CCSC, proclaiming that SafeCard's busi-

ness practices "ripped off the public"

joined forces in what each claimed to

consider a holy crusade in "the public

interest": the restraint of the growth of

SafeCard's stock and SafeCard's business.

The people at CCSC fed unfavorable

material to the people at Barrons with sure

knowledge that it would be recycled into

the seemingly disinterested Barrons for

exhibition to potential clients in head-

to-head competition with SafeCard. The

recycled material, in draft form, was

submitted to the people at CCSC by

Barrons prior to publication. The people

at Barrons published the material with the

intent and knowledge that with the help of

Barrons-related, market-maker short-

selling, SafeCard's business and_ stock

would be severely harmed.

Sorely restrained, both in the stock

market and in the marketplace by this

deadly combination, SafeCard brought suit

against Dow Jones and CCSC, alleging,

among other things, market manipulation

by Barrons in violation of S.E.C. Rule

10b-5. SafeCard, hoping to avoid the

special privilege fact-finding process

accorded to the press in libel suits, did

not include a libel count in its Complaint.

During the proceedings, Tow Jones

admitted that Barrons despised SafeCard's

Chairman of the Board, Peter A. Halmos;

that Barrons had the power to influence

the market in SafeCard's stock downward;

that Barrons intended the articles in

question to influence the market for

SafeCard's stock downward; that the

articles in question did, in fact, influence

the price of SafeCard's stock downward;

and that two of the articles contained

untruths. However, claimed Dow Jones,

one untruth was not material and the other

was protected opinion, albeit stated as a

fact.

Throughout the proceedings, Dow

Jones chided SafeCard for its failure to

include a libel count in its Complaint and

contended that, even though SafeCard did

not include a libel count, Dow Jones was,

nevertheless, entitled to the special privi-

lege fact-finding process accorded to the

press in libel cases. The trial court,

using the special fact-finding process to

formulate its summary judgment, also noted

that SafeCard had not included a libel

count in its Complaints.

Without treating the subsidiary issues

surrounding the two admitted untruths as

matters of law rather than matters of fact,

the trial court could not have granted

summary judgment. The court’ in

considering whether the statement "I

maintain that [SafeCard], in fact, is

engaged in accounting no-nos" was fact or

opinion said: "Whether ‘in fact' implies it

is a matter of fact that . . ., or was used

merely for emphasis, is a question over

which reasonable minds might differ." 537

F.Supp. at 1143.

The first untruth appeared in the

June 19, 1978 Barrons. article which

severely impacted the price of SafeCard's

stock on the downside. The theme of the

article was that, although today things

looked bright for SafeCard, dark days

loomed ahead, growing out of SafeCard's

use of a negative option technique in

selling its services. Negative option,

proclaimed the article, was already "no-go"

for products, and the FTC was looking

into the _ relationship between negative

option and sales of services, the clear

implication being that negative option

would soon also be "no-go" for services.

In fact, negative option was not "no-go"

for products, and the author of the

Barrons article had the notes of his

research assistant reflecting that negative

option for products was perfectly legal

when the article was written. Using the

special privilege fact-finding process

available to the press in libel cases, the

trial court treated the question of materi-

ality of the admitted untruth as one of law

and not of fact, and concluded by

summary judgment that the untruth was

immaterial.

The second admitted untruth came in

the Barrons article of July 6, 1982, which

single-handedly killed a firm commitment

underwriting of SafeCard's stock then in

progress. Underwritings cannot proceed

until the S.E.C. approves the registration

statement of the issuer. The S.E.C. does

not approve registration statements that

include financial statements not prepared

in accordance with generally accepted

accounting principles. The July 6, 1982

article was supposedly prepared. by

Abraham Briloff, an accountant; his theme

is wrapped in this terse sentence: "I

maintain that the company, in fact, is

engaged in accounting no-nos." (Emphasis

ours). Dow Jones contended that ".

Dr. Briloff, acknowledging that SafeCard's

accounting comported with ~~ generally

accepted accounting principles and had

been blessed by its independent auditors,

repeatedly stated that he was_ 'simply

putting forth his views of the accounting

practice in issue’. Contrast this with

Briloff's own characterization of the

article: "By this glib reference

SafeCard pretends it has blunted my flat

assertion that it's accounting principles do

violence to a fair application of generally

accepted accounting principles. ...."

(Emphasis ours).

Once again, using the special privi-

lege fact-finding process available to the

press in libel cases, the trial court treated

the question of whether the admitted

untruth was one of fact or opinion as one

of law and concluded by summary judgment

that what Briloff characterized as "his flat

assertion" was mere protected "opinion".

It is the propriety of this special

privilege fact-finding process that

SafeCard requests this Court to address

by its Petition for Certiorari.

VIII

REASONS FOR GRANTING THE WRIT

No statement has been repeated nor

confirmed by experience more than Lord

Acton's "power corrupts; and _ absolute

power corrupts absolutely". No phrase

has more currency in our language than

"the arrogance of power". Unfortunately,

the singular power entrusted to the press

through the First Amendment by this

Court in the libel cases of the nineteen-

sixties and early nineteen-seventies begin-

ning with New York Times v. Sullivan, 376

U.S. 254, 84 S.Ct. 710, 11 L.Ed. 2d 684

(1964), has proven no exception to the

wisdom implicit in these sayings as the

instant case _ illustrates. Pre Sullivan,

what member of the press would dare to

boast "I got in the final licks" in an

article that wiped out a stock under-

writing. Pre Sullivan, what member of the

press would react to criticism by the

victim of an unfavorable article by explod-

ing under oath that the victim is a

"phony" and a "nut" and a "despicable

person" who "obviously wants to throttle

the press . .. hates criticism . .. [and]

doesn't understand the institutions

of this country at all." The ordinary

people who sit on juries have noticed the

arrogance of certain members of the press

that has accompanied the unique privileges

accorded to the press by this Court after

Sullivan. As the defendant Dow Jones

reported in the June 24, 1983 edition of its

Wall Street Journal:

Appellate review is especially

important to the press - given

it's sorry record of late in the

trial courts. Recent = studies

show media defendants in libel

suits lose over 80% of cases at

trial but go on to win nearly 70%

at the appeals court level. .

(Underlining ours).

The press, however, has not since

Sullivan had to worry very much about the

fact-finding processes of a trial. Few

press litigation specialists today even know

what a trial is, so frequent are the sum-

mary judgments, and those who are com-

pelled to suffer a trial take comfort in the

knowledge that any adverse finding by the

jury or trial judge that their claimed

honest mistakes or opinions are, in reality,

lies, will be reversed on appeal, no matter

that those findings are not "clearly erro-

neous". In libel cases, the courts have

simply come to treet the question of

whether an untruth is an honest mistake

or an opinion as one of law and not of

fact, even though tacitly recognizing that

the opposite is, in reality, the case.

This Court, by granting certiorari on

April 25, 1983, in Bose v. Consumers

Reports, No. 1646, appears to have

determined to reexamine with a view to

contraction the special fact-finding process

established for the press in defamation

cases. The instant case is important to

that reexamination because this case to

date represents a successful effort by the

financial press to stretch the _ special

privilege fact-finding process of libel

actions to other actions against the press

such as actions for market manipulation

under S.E.C. Rule 10b-5. If the ordinary

citizen is accused of artificially influencing

the market price of stock by lies, he must

submit to a full-fledged trial and accept, if

it comes, the verdict of the trier of fact

that what he claims was an honest mistake

or opinion was, in fact, a lie. Under the

law of the instant case however, a member

of the press similarly accused need suffer

no such thing; he probably will not have

to go to trial or, if he goes and loses, he

will enjoy de novo consideration on appeal.

In other words, in a market manipulation

case, the question of whether an untruth

is a lie or an opinion is a question of fact

for the ordinary citizen but a question of

law for the press. If the scales of justice

which are the symbol of this Court are to

be kept in balance, this Court must adjust

those scales by a definitive opinion making

clear that the special fact-finding process

available to the press in defamation cases

apply, if at all anymore, only in defama-

tion cases.

KELLY, BLACK, BLACK, EARLE

& PATCHEN, P.A.

Attorneys for SafeCard

Services, Inc.

1400 Alfred I. duPont Bldg.

169 East Flagler Street

Miami, Florid 131

APPENDIX TO

PETITION FOR WRIT OF CERTIORARI TO

THE FOURTH CIRCUIT COURT OF APPEALS

IN THE UNITED STATES PISTRICT COURT

FOR THE SOUTHERN DISTRICT OF VIRGINIA

Alexandria Division

SAFECARD SERVICES,

INC “>,

Plaintiff,

Civil Action

)

Vv. )

) No. 81-0631-A

)

DOW JONES & COMPANY,

INC,, et al.,

Defendants.

ORDER

This matter came before the court on

motions for summary judgment brought by

defendants under Fed.R.Civ.P. 56(b).

For reasons stated in the accompanying

semerendum, the court GRANTS summary

judgment to defendants Dow Jones and

Company, Inc., Alan Abelson and Stephen

Anreder on Counts I and II, and also

DISMISSES without prejudice the remaining

counts as to them. Also, for reasons

stated in the memorandum, the _ court

GRANTS summary judgment to defendants

Credit Card Sevices Corporation, John P.

Ferry and Walter Hurney on Count I, and

DENIES them summary judgment on the

remaining counts.

Let the Clerk send a copy of this

order and the accompanying Memorandum

to counsel of record.

Richard L. Williams

ISTRICT JUDGE

DATE: April 29, 1982

SAFECARD SERVICES, INC., Plaintiff,

Vv.

DOW JONES & COMPANY, INC., et al,

Defendants,

Civ. A. No. 81-0631-A

United States District Court,

E.D. Virginia,

Alexandria Division.

April 29, 1982

Credit card loss notification service

brought action against another such ser-

vice, its board chairman and_ vice-

president and the publisher of a financial

journal and journal columnists alleging

violation of securities regulation and

antitrust law. The defendants moved for

summary judgment. The District Court,

Richard L. Williams, J., held that: (1)

plaintiff could not bring claim against

publisher and columnists under securities

regulation prohibiting publication of false

or misleading statement in connection with

sale of securities where statements were

expressions of opinion appearing in press

and where service voluntarily sold stock

under stock option plan after knowledge of

alleged fraud; (2) monopoly claims against

publisher and columnists could not be

maintained where evidence was too attenu-

ated for rational jury to infer’ specific

intent; (3) claim against other service

under securities regulation could not be

maintained since that service did not make

alleged false and misleading statements;

and (4) issues of material fact remained on

monopoly claim against other service,

precluding summary judgment.

Partial summary judgment granted.

1. Securities Regulation (Key No. 119)

Credit card loss notification service

could not bring action against publisher of

financial journal and journal columnists for

violating securities regulation against

issuing untrue statement of material facts

in connection with sale of securities where

service did not rely on disparaging journal

articles when it voluntarily sold stock to

employees under stock option plan which

was established after service had knowl-

edge of alleged misrepresentations. Secu-

rities Exchange Act of 1934, §10(b), 15

U.S.C.A. §78j(b).

2. Securities Regulation (Key No. 63)

Under securities regulation prohibit-

ing publication of untrue statements of

material fact in connection with sale of

securities, fact is not "material" if there is

not substantial likelihood that reasonable

investor would consider fact important in

making investment decision. Securities

Exchange Act of 1934, {10(b), 15

U.S.C.A. §78j(b).

See publication Words and Phrases for

other judicial constructions and

definitions.

3. Securities Regulation (Key No. 60)

Credit card loss notification service

could not bring action against publisher of

financial journal and journal columnists

under’ securities regulation prohibiting

publication of untrue statements of material

facts in connection with sale of securities

where statements alleged to be untrue were

expressions of opinion appearing in press,

opinions were not clearly unreasonable,

there was no evidence that columnists did

not believe opinion expressed or that

columnists or publisher had any economic

interest in service or its competitors, and

columnists were not insiders to service.

Securities Exchange Act of 1934, %10(b),

15 U.S.C.A. 78j(b).

4. Monopolies (Key No. 28[7.1])

Specific intent to monopolize may be

inferred from extreme _ predatory’ or

exclusionary conduct. Sherman Anti-Trust

Act, 92, 15 U.S.C.A. 12.

5. Monopolies (Key No. 12[3])

Claim of credit card loss notification

service that publisher of financial journal

and journal columnists conspired with

service competitor to monopolize’ such

service could not be maintained where

evidence of columnist's personal animosity

toward service board chairman, publisher's

contacting competitor and federal agencies

concerning service, similarity of critical

statements made by competitor and pub-

lisher, and use by competitor of articles

published in financial journal in competing

for accounts was too attenuated for ratio-

nal jury to infer specific intent and where

there was no evidence of economic benefit

inuring to publisher and columnists as

result of their alleged acts. Sherman

Anti-Trust Act, 12, 15 U.S.C.A. 92.

6. Monopolies (Key No. 12[3])

Publication by financial journal pub-

lisher of articles containing disparaging

comments about credit card loss notification

service did not constitute a violation of

Sherman Anti-Trust Act prohibition against

restraint of trade even assuming combi-

nation of publisher and service competitor

where articles contained truth = and

reasoned opinion. Sherman Anti-Trust

Act, 91, 15 U.S.C.A. 1.

7. Federal Courts (Kev No. 17)

Federal district court would decline to

exercise pendent jurisdiction over state

claims for conspiracy to injure another in

trade or business brought by credit card

loss notification service against publisher

of financial journal and journal columnists

where application of state conspiracy law

to press defendants could raise substantial

constitutional questions from which court

should abstain and where district court

had doubts regarding propriety of apply-

ing Virginia law as between parties whose

principal places of business were in Florida

and New York. Va.Code 1950, §§18.2-499,

18,.2-500, 18.2-500(a).

8. Securities Regulation (Key No. 60)

Credit card loss notification service

could not bring action against another

such service, its board chairman and

vice-president for violating securities

regulation prohibiting publication of untrue

and misleading statements in connection

with sale of securities where statements

were not made by the other service but by

publisher of financial journal and _ its

columnists. Securities Exchange Act of

1934, §10(b), 15 U.S.C.A. §78j(b).

9. Federal Civil Procedure (Key No.

2484)

In action by credit card loss notifica-

tion service against another such service,

its board chairman and vice-president for

conspiracy to monopolize and pendent state

claims for conspiracy to injure another in

trade or business, issues of material fact

remained on question whether board chair-

man and _ vice-president conspired with

other service, precluding summary judg-

ment. Va.Code 1950, §§18.2-499,

18,2-500, 18.2-500(a); Sherman Anti-Trust

Act, $81, 2; 18 U.S.C.A. 881, 32;

Fed.Rules Civ.Proc. Rule 56(b), 28

U.S.C.A.

Oren R. Lewis, Jr., Arlington, Va.,

Hugo L. Black, Jr., Miami, Fla., for

plaintiff SafeCard.

David Fiske, John €E, Coffey,

Alexandria, Va., for defendants Ferris,

Hurney, Kushnick, Ferry and Credit Card

Service Corp.

Thomas Moncure, Alexandria, Va.,

for defendants Dow Jones & Co., Inc.,

Abelson and Anreder.

Philip Hare, Falls Church, Va., for

defendant Purcell Graham & Co.

Andrew P. Miller, Washington, D.C.,

for defendant Cox.

MEMORANDUM

RICHARD L. WILLIAMS, District

Judge.

This matter came before the court on

defendants' motions for summary judgment

under Fed.R.Civ.P. 56(b). For the

reasons stated below, the court grants

partial summary judgment to defendants.

Plaintiff SafeCard is a public company

engaged in the mass mail order marketing

of a loss notification service for credit

cards. A cardholder has a maximum

liability of $50 per card when an unauthor-

ized use of a card as a result of loss or

theft occurs. If the cardholder notifies

the issuer of the card's theft or loss

before an unauthorized use of the card

occurs, the cardholder has no liability.

See 15 U.S.C. §1643. Of course, the

cardholder may notify each card issuer

directly when he loses credit cards. The

chief benefit of the service is its conve-

nience: a subscriber whose cards are

missing need call only the _ notification

service instead of calling each card issuer.

SafeCard markets its service through

credit card issuers. Because the service

is marketed through but is not supplied by

the issuers, SafeCard refers to its market-

ing as "third-party-endorsed."

SafeCard claims that the defendants

conspired to disseminate false or misleading

statements in connection with SafeCard's

sales of its securities, in violation of

§10(b) of the Securites Exchange Act of

1934, 15 U.S.C. §78j, and Rule 10b-5

thereunder (Count I); and that. the

defendants conspired to eliminate SafeCard

1. In pertinent part, Section 10(b)

provides:

It shall be unlawful for any person,

directly or indirectly, by the use of any

means or instrumentality of interstate

commerce or of the mails, or of any facility

of any national securities exchange --

(b) To use or employ, in connection

with the purchase or sale of any security

registered on a_ national _ securities

exchange or any security not so

registered, any manipulative or deceptive

device or contrivance in contravention of

such rules and _ regulations as_ the

Commission may prescribe as necessary or

appropriate in the public interest or for

the protection of investors.

Rule 10b-5, promulgated thereunder,

provides:

It shall be unlawful for any person,

directly or indirectly, by the use of any

means or instrumentality of interstate

commerce, or of the mails or of any facility

of any national securities exchange.

(a) To employ any device, scheme, or

artifice to defraud,

(b) To make any untrue statement of

a material fact or to omit to state a

material fact necessary in order to make

the statements made, in the light of the

circumstances under which they were

made, not misleading, or

or course of business which operates or

from competition in the credit card loss

notification market, in violation of Sections

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

2 3

§§1 and 2 (Count II). Pendent state

would operate as a fraud or deceit upon

any person, in connection with the

purchase or sale of any security.

2. Section 1 provides, in pertinent part:

Every contract, combination in the

form of trust or otherwise, or conspiracy,

in restraint of trade or commerce among

the several States, or with foreign

nations, is declared to be illegal.

Section 2 provides:

Every person who shall monopolize, or

attempt to monopolize, or combine or

conspire with any other person or persons

to monopolize any part of the trade or

commerce among the several States, or

with foreign nations, shall be deemed

guilty of a misdemeanor, and, on

conviction thereof, shall be punished by

fine not exceeding fifty thousand dollars,

or by imprisonment not exceeding one

year, or by both said punishments, in the

discretion of court. 15 U.S.C. §2.

3. The court has jurisdiction under 15

U.S.C, §78aa, 15 U.S.C. §15, and 28

U.S.C. $1331.

claims accompany’ the _ federal claims

(Counts III, IV and V.)

Defendant Credit Card Services

Corporation ("CCSC") also runs a credit

card loss notification service that is

marketed by third-party endorsements.

CCSC is located in Alexandria, Virginia.

Defendant Ferry is the Chairman of the

Board of CCSC. CCSC employs defendant

Hurney as_ Vice-President of Sales.

(These three defendants are referred to

collectively as "the CCSC defendants").

Dow Jones is a publicly held corpo-

ration which publishes Barron's National

Business and Financial Weekly ("Barron's")

and The Wall Street Journal. Defendant

Abelson works for Barron's; he writes a

column in it entitled "Up and Down Wall

Street." Defendant Anreder also works

for Barron's; he assisted Abelson in

preparation of his column. (These three

defendants are referred to collectively as

"the Dow Jones defendants". )

According to SafeCard, CCSC, Ferry,

Hurney and others conspired to monopolize

the "third-party-endorsed credit card loss

notification market" as early as 1977. The

conspirators had an agent steal a copy of

the confidential proposal SafeCard had

submitted to Standard Oil of California.

They also decided to manipulate the market

for SafeCard stock and to "stir up govern-

mental investigatory agencies against

SafeCard."4 (Second Amended Complaint,

927.)

4. In March of 1977 the Federal Trade

Commission notified SafeCard that the FTC

was conducting an _ examination of

SafeCard's practices in relation to 15

U.S.C. 845. The letter notifying SafeCard

of the examination requested that it

forward to the FTC. descriptions of

SafeCard's enrollment and billing

procedures.

In late November 1978, SafeCard's

counsel received another letter from the

FTC. This letter stated:

"We are concerned that HotLine's

{[SafeCard's] advertising may inadequately

explain the negative option aspect of

HotLine's billing procedure, and fail to

apprise customers that they will be

required to act affirmatively to cancel

HotLine services in order to prevent an

automatic billing extending coverage

beyond the 6 month free trial period. We

believe that the inadequacies of HotLine's

advertising may constitute a failure to

disclose material facts necessary to portray

fairly the negative option aspect of

HotLine's billing arrangements and may,

therefore, violate Section 5 of the Federal

Trade Commission Act, 15 U.S.C. Section

45."

The letter requested that SafeCard

forward its advertising and _ solicitation

materials to the FTC,

The investigation by the FTC was

closed in June 1979.

On September 18, 1978, the Securities

The conspirators then "enlisted the

aid" of the Dow Jones defendants. The

and Exchange Commission sent SafeCard a

letter with a subpoena duces_ tecum

attached, requiring the production of

certain documents. The letter notified

SafeCard that the SEC had entered a

"Formal Order of Investigation" of the

company. An internal document of the

SEC, recommending that the investigation

be closed, dated June 27, 1980 states that

{[t]his matter came to the attention of

the Miami Branch Office as a result of

information reported by a former

vice-president of SafeCard . . ., whereby

he alleged that SafeCard was incapable of

providing the services to its customers for

which it was billing them; SafeCard

prematurely recognized $1.9 million in

revenue during the second quarter of

1978; and that SafeCard was not recording

all its liabilities on its books.

Originally SafeCard believed that both

the SEC and Barron's were dupes of the

former SafeCard vice-president, Warren E.

Drew, and did not consider the Dow Jones

defendants participants in a conspiracy.

On June 20, 1980, SafeCard's counsel

wrote the SEC:

The sole source of this charge is the

aforementioned Warren E. Drew. We have

many times expressed our dismay that one

such as Warren E. Drew could have

established such credibility with cynical

public and private institutions such as the

SEC and Barron's. Perhaps, however,

neither institution has been exposed before

Dow Jones publications were to provide

""independent' press verification of the

malicious and disparaging charges which

CCSC and its conspiratorial agents were

making as part of their campaign to elimi-

nate SafeCard as CCSC's only competitor

in the relevant market." (Second Amended

Complaint, 139)

THE DOW JONES DEFENDANTS

I. COUNT I: THE RULE 10b-5

CLAIM. Four articles critical of SafeCard

appeared in Barron's between June 19,

1978, and July 6, 1981. The authors were

to a hot stock artist putatively transformed

instanter by an angel vision straight out

of his television set from a wolf fat from

the blood of widows and orphans to a lamb

ready to sacrifice all for widows and

orphans. Whatever, we all know that the

Devil never turns loose one of his disciples

gracefully and, alas, that pitchforked tail

ogre was not to be denied his influence

over Warren E. Drew... .

Abelson, Anreder and Dr. Abraham

Briloff, the Emmanuel Saxe Distinguished

Professor of Accountancy at Baruch

College of the City University of New

York. The articles disparaged SafeCard in

various ways: they questioned the value

of SafeCard's _ stock, impugned its

accounting techniques, reported

governmental investigations of SafeCard,

and commented on its marketing

techniques. SafeCard claims that the

articles contain untrue statements. of

material fact,” or omit to state material

facts, in order to create a false impres-

sion, and that these statements’ or

omissions were made in connection with the

5. Curiously, although SafeCard alleges

falsehood and malice on the part of the

Dow Jones defendants, it has not brought

@ pendent state libel claim.

grant and exercise of certain SafeCard

options.

A. "In connection with... sale."

{1) It is clear that plaintiff con-

sidered itself the victim of widely circu-

lated misinformation about it long before it

chose to grant options. A letter from the

chairman of SafeCard to Warren H. Phillips

of Dow Jones, dated October 30, 1978,

states: "(I]t appears Barron's knowingly

and maliciously published false information

designed to wreak havoc on the business

of SafeCard as well as the public market

for its securities." In another letter,

reprinted in the March 26, 1979 issue of

Barron's, SafeCard's counsel states: "If

what you do this time is as irresponsible,

malicious and untrue as it was last time,

we shall hold you, Mr. Abelson, Barron's

and Dow Jones responsible for all the

consequences of the previous article and

whatever you come up with this time."

The earliest time that a "sale"® could

have occurred is on October 22, 1979,

6. The definition of "sale" given in

Section 3(a)(14) of the Securities Exchange

Act of 1934, 15 U.S.C. §78c(a)(14), is

very broad: "any contract to sell or

otherwise dispose of." The exercise of a

stock option is a sale for purposes of the

Act. Maldonado v. Flynn, 448 F.Supp.

1032 (S.D.N.Y. 1978). However, the

court does not agree with SafeCard's Form

10-K for the fiscal year ended October 31,

1981, filed January 29, 1982, which reads:

"No options were exercised during the

fiscal year ended October 31, 1981,

However, during fiscal 1980, officers and

directors holding stock options to purchase

313,200 shares, personally and

unconditionally obligated themselves to pay

the exercise price of the options within the

five-year term of the options, thereby

exercising said options." The court

believes that a correct statement as to

exercise was included in SafeCard's Form

10-K submitted for the previous fiscal

year: "At October 31, 1980, none of the

above listed options had been exercised,

with options for 7,000 shares still available

for grant urder the 1979 non-qualified

stock option plan." Nonetheless, because

the grant of options is a sale within the

meaning of Section 3(a)(14), Collins v.

Rukin, 342 F.Supp. 1282 (D.Mass.

Wright v. Heizer Corp., 560 F.2d 236 (7th

Cir. 1977), cert. denied, 434 U.S. 1066,

98 S.Ct. 1243, 55 L.Ed.2d 767 (1978), the

court assumes for purposes of this motion

when SafeCard's management decided to

establish a stock option plan. The Safe-

Card board ratified this plan on

December 11, 1979. The first agreements

to exercise the options were signed by

SafeCard officers beginning in March of

1980.

In the ordinary situation a false or

misleading statement of material fact causes

a sale when the seller relies on it. For

instance, a false or misleading statement

made in a newspaper column, relied on by

stockholder readers, may cause them to

that the grant of options by SafeCard

constituted sales within the meaning of

Section 3(a)(14).

SafeCard also claims a "sale" within

the meaning of Section 3(a)(14) when it

signed an underwriting contract for

issuance of 1,000,000 shares of stock with

Drexel, Burnham, Lambert, Inc. on

May 20, 1981. Whether or not this counts

as a sale for purposes of §10(b), SafeCard

was aware at that time also of the

publication of what it regarded as false or

misleading statements about it.

sell to their detriment. By contrast, if

the seller knows the statement to be false,

he has not relied on its purported vera-

city, and the statement has not induced

his sale. SafeCard clearly did not rely on

the Dow Jones defendants' statements

about it. Also, SafeCard does not claim

that the statements caused it to sell.

Whether proof of some causal nexus

between fraud and _ sale _ ("transaction

causation") is an essential element of proof

is a matter of dispute. Some courts have

not required proof of transaction causa-

tion. After all, the policy of Rule 10b-5

is to deter frauds and to provide redress

for the losses caused by frauds. ("Loss

causation" definitely is a necessary element

of proof.) Other courts have required

proof of transaction causation. Compare

Ketchum v. Green, 557 F.2d 1022, 1029

(3d Cir. 1977), cert, denied, 434 U.S,

940, 98 S.Ct. 431, 54 L.Ed.2d 300 (1977),

with Schlick v. Penn-Dixie Cement Corp.,

507 F.2d 374, 380-81 (2d Cir. 1974), cert.

denied, 421 U.S. 976, 95 S.Ct. 1976, 44

L.Ed.2d 467 (1975).

In Gurley v. Documation, Inc., 674

F.2d 253 (4th Cir. 1982), the Fourth

Circuit denied standing to a plaintiff who

claimed he was fraudulently caused to

delay the sale of his securities, because of

the potential for abuse of §10(b) by plain-

tiffs with unmeritorious claims. Because a

delay-in-sale claim would turn on

conflicting testimony as to whether fraud

was the cause of the delay in sale, a

plaintiff with an unmeritorious§ delay-

in-sale claim would be able to resist dis-

position of his suit by pretrial motion, and

could exert pressure on a defendant to

settle even a frivolous case. See Gurley

at 256-258.

Gurley bears on the instant case in

two ways. First, it implies that

transaction causation is 4 relevant

consideration in a misrepresentation case.

Compare Affiliated Ute Citizens v. United

States, 406 U.S. 128, 92 S.Ct. 1456, 31

L.Ed.2d 741 (1972) (obligation to disclose

plus withholding of material fact

establishes requisite causation and reliance

in case involving primarily failure to

disclose). Second, it rejects a certain

type of transaction causation as

insufficient to confer standing under

§10(b), because the speculative nature of

proof of that kind of causation would open

up a Pandora's box of unmeritorious

claims.

A finding of "in connection with"

where a person sells after knowledge of a

fraud would put him in an anomalous

risk-free situation: if his securities

performed less well than he hoped, he

could sue under §10(b) to raise his yield;

or if his securities performed up to

expectations despite the fraud, he would

refrain from suit. By contrast, a seller in

a non-fraud situation always takes a risk

that the performance of his securities will

fall below expectations.

It is not the purpose of Rule 10b-5 to

establish an insurance’ scheme for

corporate issues and investors. See List

v. Fashion Park, Inc., 340 F.2d 457, 463

(2d Cir. 1965), cert denied, 382 U.S. 811,

86 S.Ct, 23, 15 L.Ed.2d 60 (1965). "The

securities laws were not enacted to protect

sophisticated businessmen from their own

errors of judgment." Hirsch v. DuPont,

553 F.2d 750, 763 (2d Cir. 1977). The

court holds that a corporate securities

issuer who voluntarily’ sells after

7. Involuntary sales are a_ different

matter. See Vine v. Beneficial Fin. Co.,

374 F.2d 627 (2d Cir. 1967), cert. denied,

389 U.S. 970, 88 S.Ct. 463, I9 C.Ed.2a

460 (1967) (forced sales of stockholders by

knowledge of a fraud does not rely on and

is not caused to sell by the fraud, and

cannot recover under Rule 10b-5. In re

Penn Central Securities Litigation, 62

F.R.D,. 181, 186 (E.D,.Pa,1974).

B. "Untrue statement of material

fact."

{2] A true statement does not fall

within the ambit of Rule 10b-5. A number

of statements to which SafeCard objects

are indisputably true. .

short-form merger squeeze-out makes

reliance irrelevant).

8. In the June 19, 1978 issue of

Barron's, Abelson stated:

e thing that's bothered us from the

start was the ‘negative option' aspect to

the company's Hot Line service -- that is,

if the credit cardholder, during his free

trial period, doesn't actively do something

to cancel, he's automatically enrolled and

just as automatically billed. That sort of

thing is strictly no-go now if a product is

involved. We're not at all clear why a

service is different. But legally, it is

different. We might add that it seems

A number of statements appearing in

the articles, particularly those authored by

Dr. Briloff, are expressions of opinion.

Although Rule 10b-5 speaks in terms of

statements and omissions of facts, some

opinions have been considered statements

of "fact" for purposes of Rule 10b-5. See

e.g.» Dolgow v. Anderson, 53 F.R.D. 664

(E.D.N.Y. 1971), affirmed per curiam, 464

F.2d 437 (2d Cir. 1972). In such cases

the defendant usually is a broker-dealer,

common practice in the field; at least, so

far as we know, at least one major

SafeCard competitor uses the _ identical

approach.

Dow Jones acknowledged that the

statement that negative option is "no-go"

for products is incorrect. However, that

is not an untrue statement of material fact,

since SafeCard offers a service.

A fact is not material if there is not a

substantial likelihood that a reasonable

investor would consider the fact important

in making her investment decision. TSC

Industries, Inc. v. Northw Inc., 426

2131

We ’ n. ’ °

n.9, 48 L.Ed.2d 757 (1976).

who by virtue of his position and relation-

ship to clients has a duty to disclose what

he knows and to undertake a reasonable

investigation. See e.g., Hanly v. Secu-

rities and Exchange Commission, 415 F.2d

589 (2d Cir. 1969). This duty is not

obviously transferable to writers for a

newspaper.

[3] The court holds that Rule 10b-5

cannot reach the Dow Jones defendants'

statements expressing opinion, because the

statements appeared in the press, the

context or specific assertions make clear

that the statements are expressions of

opinion, the opinions are not clearly

9. SafeCard singles out Dr. Briloff's

statement in the July 6, 1981, issue of

Barron's, "I maintain that the company, in

fact, Is engaged in accounting no-no's" as

an example of a statement put forward as

an assertion of fact. Whether "in fact"

implies "it is a matter of fact that. . .",

or was used merely for emphasis, is a

question over which reasonable minds

unreasonable (in which case they would be

immaterial anyway), there is no evidence

might differ. More telling that’ the

statement is an expression of opinion is

the sentence's beginning with "I maintain

that . .. ." Most important, the context

in which the statement appears indicates

that the author is expressing his own

opinion, with which (the author duly

notes) others disagree. In pertinent part,

the article reads:

As a general rule, cost deferrals are

comprehensible to the extent that they

seek to match costs with revenues.

But--and in SafeCard's case, this is a

very big but--as the company's footnote

suggests, SafeCard is matching most costs

not only against revenues but also against

extended expectations. And this is where

the concern and its auditors, as I see it,

part company with proper accounting.

As the financial statements indicate,

SafeCard charges off its marketing costs

over a 3-to-10 year period (as noted, the

company recently shifted to a principally

10-year write-off, but more about that

later). In fiscal 1980, the expense for its

service programs amounted to $7.8 million

($1.5 million, $1.7 million, $1.9 million and

$2.7 million for the four consecutive fiscal

quarters). In the first two quarters of

the current fiscal year, the amounts

charged were $2.9 million and $3.4 million,

respectively.

This amortization process presumably

is entirely in accord with enerally

accepted accounting principles, nee the

that the opiner does not believe the opin-

ion he expressed, there is no evidence

fiscal year reports received the nihil

obstat (a clean opinion) from Alexander

Grant & Co., afeCard's independent

auditor. Ihe interim quarterly data for

the current year, albeit unaudited, are

included in a June 1981 _ preliminary

prospectus (issued in connection with a

proposed one-million share common stock

offering, the proceeds to go roughly half

to the company and half to certain selling

stockholders). Further, SafeCard's

management has _ advised me that its

accountin ae practices have been reviewed

ut the curities & Exchange Commission's

ami office and found appropriate.

All this authentication

notwithstanding, I respectfully disa

I maintain that the company, in fact, is

engaged in accounting no-nos. When

queried by me, the company's management

and its auditors responded by asserting

that they were following the "matching

process," i.e., the matching of costs

against related revenues. As I suggested,

this is fine, up to a point. But SafeCard,

I submit, is carrying this concept to an

extreme.

Thus, it is matching increased costs

not only against revenues presumed to

have been derived from those outlays, but

also, as noted, those expected to be

derived in the future. Trouble is, the

latter is expected to be derived over as

much as a decade through renewals, which

may or may not materialize and which make

that the opiner or the publisher have had

any economic interest in the corporation

written about or in competitor corpo-

rations, and the opiners are not insiders

to the corporation written about.

II, COUNT II: THE ANTITRUST

COUNT. The Dow Jones defendants are

capable of committing antitrust violations

against SafeCard only via conspiracy.

Since Dow Jones does not compete with

SafeCard, the Sherman Act's §2 prohibition

on attempts to monopolize cannot apply to

Dow Jones.

A. Sherman Act __ §2: Specific

Intent.

little, if any, allowance for heightened

competition or changing technology. And

here is where I contend that SafeCard's

management and auditors have departed

from a fair application of generally

accepted accounting principles, with a

consequent distortion of the company's

financial statements. [Emphasis added]

To establish the existence of a combi-

nation or conspiracy to monopolize in

violation of Section 2, a plaintiff must

prove the following elements: (1) the

existence of a combination or conspiracy;

(2) overt acts done in furtherance of the

combination or conspiracy; (3) an effect

upon a substantial amount of interstate

commerce; and (4) the existence of specific

intent to monopolize. Cullum Electric &

Mechanical, Inc. v. Mechanical Contractors

Association of South Carolina, 436 F.Supp.

418, 425 (D.S.C.1976), affirmed, 569 F.2d

821 (4th Cir.), cert, denied, 439 U.S.

910, 99 S.Ct. 277, 58 L.Ed.2d 255 (1978).

SafeCard's proposed’ evidence _ to

prove specific intent on the part of the

Dow Jones’ defendants includes: (1)

Abelson evinced personal animosity towards

SafeCard chairman Peter Halmos; (2) the

Dow Jones defendants contacted SafeCard's

competitor CCSC and federal agencies

concerning SafeCard on various occasions;

(3) an advance copy or draft of a Barron's

article may have reached one of the other

defendants; (4) statements critical of

SafeCard made by different defendants

were similar in content; (5) statements

published by the Dow Jones defendants

were false or misleading; and (6) CCSC

used the publications against SafeCard in

competing for accounts.

CCSC's using the publications to

scare accounts away from SafeCard merely

illustrates the propensity of competitors to

repeat unflattering statements about the

opposition. Abelson's animosity is consis-

tent both with monopolistic and nonmonopo-

listic intent. The Dow Jones defendants'

contacts with CCSC and federal agencies

are consistent with ordinary news gather-

ing. Dow Jones published no falsehoods

about SafeCard. The publication of truth

and reasoned opinion (which may or may

not agree with the opinions of news

sources) is consistent with ordinary news

reporting and commentary. Were

newspapers to become hostage to antitrust

suits surviving pretrial disposition on the

basis of news source contacts and critical

commentary, the threat of such suits would

operate as a deterrent to the effective

functioning of the press.

Even though proof that defendants

have engaged in practices that make no

economic sense unless monopoly results is

not an essential element of a Sherman Act

§2 claim, such proof is often offered as

probative of the existence of conspiracy

under both §§1 and 2. See Admiral

Theatre Corp. v. Douglas Theatre Co.,

585 F.2d 877, 884 (8th Cir. 1978); H & B

Equipment Co., Inc. v. _ International

Harvester Co., 577 F.2d 239, 245 (5th

Cir. 1978); Overseas Motors, Inc. v.

Import Motors, Ltd., 375 F.Supp. 499, 535

(S.D.Mich. 1974), affirmed, 519 F.2d 119

(6th Cir. 1975), cert. denied, 423 U.S.

987, 96 S.Ct. 395, 46 L.Ed.2d 304 (1975).

[4] Specific intent to monopolize also

may be inferred from extreme predatory or

exclusionary conduct. Human Resource

Institute v. Blue Cross, 498 F.Supp. 63

(E.D.Va.1980); United States v. Jerrold

Electronics Corp., 187 F.Supp. 545

(E,.D.Pa,1960), affirmed, 365 U.S. 567, 81

S.Ct. 755, 5 L.Ed.2d 806 (1961);

Greenville Publishing Co. v. __ Daily

Reflector, Inc., 496 F.2d 391 (4th Cir.

1974).

{5} Of course, it would be impossible

for a noncompetitor such as Dow Jones to

engage in "predatory conduct" towards

SafeCard, but it is entirely possible for a

newspaper writer to derive economic bene-

fit from his writing by, for instance,

touting a corporation in which he owns

stock. See Zweig v. The Hearst

Corporation, 594 F.2d 1261 (9th Cir.

1979). The lack of any evidence of

economic benefit inuring to the Dow Jones

defendants as a result of their alleged acts

militates strongly against the reasonable-

ness of inferring the requisite specific

intent in this case. See First National

Bank of Arizona v. Cities Service Co., 391

U.S. 253, 287, 88 S.Ct. 1575, 1591, 20

L.Ed.2d 569 (1968) (lack of benefit to

defendant militates against finding of

conspiracy).

The standards governing summary

judgment in antitrust actions are _ well-

known. Plaintiffs can be relied upon to

quote Poller v. Columbia Broadcasting

System, Inc., 368 U.S. 464, 473, 82 S.Ct.

486, 491, 7 L.Ed.2d 458 (1962):

"[S)ummary procedures should be _ used

sparingly in complex antitrust litigation

where motive and intent play leading roles,

the proof is largely in the hands of the

alleged conspirators, and hostile witnesses

thicken the plot." Defendants exhibit a

marked preference for White Motor Co. v.

United States, 372 U.S. 253, 259, 83 S.Ct.

696, 700, 9 L.Ed.2d 738 (1963):

"Summary judgments have their place in

the antitrust field, as elsewhere... ."

The fewer the individual strands of

circumstantial evidence, and _ the _ less

distinguishable assertedly probative con-

duct is from the conduct of persons going

about their business in an ordinary way,

the less reasonable an inference of specific

intent to monopolize becomes. There is a

vanishing point beyond which inferences of

intent on the basis of "disparate strands

of highly equivocal circumstantial evidence"

become unreasonable. J.W. Burress, Inc.,

v. JLG Industries, Inc., 676 F.2d 693 (4th

Cir. 1982) (unpublished) (inferences of

conspiracy and price discrimination). The

evidence which plaintiff intends to present

at trial is too attenuated for a rational

jury to infer the specific intent required

under §2 of the Sherman Act.

B. Sherman Act §§1 and 2:

Conspiracy

For the same reasons that plaintiff's

evidence is deficient on proof of the

necessary element of specific intent under

§2, the court finds that the evidence is

likewise deficient for proof of conspiracy

under §§1 and 2,

C. Sherman Act §1: "Restraint of

Trade,"

[6] Section 1 of the Sherman Act

forbids "conspira(cies] in restraint of

trade." Soon after enactment of the

Sherman Act, the Supreme Court inter-

preted Section 1 to ban only "undue

limitation on competitive conditions," that

is, restraints which are "unreasonably

restrictive." Standard Oil of N.J. v.

United States, 221 U.S. 1, 58-60, 31 S.Ct.

502, 515-516, 55 L.Ed. 619 (1911). Some

restraints are so obviously incompatible

with competitive behavior that they consti-

tute per se violations of Section 1. See,

e.g., United States v. Socony-Vacuum Oil

Co., 310 U.S. 150, 221-3, 60 S.Ct. 811,

843-844, 84 L.Ed. 1129 (1940) (horizontal

price-fixing); United States v. Topco

Associates, Inc., 405 U.S. 596, 92 S.Ct.

1126, 31 L.Ed.2d 515 (1972) (territorial

market allocation). Other putative

restraints are subject to a "rule of reason"

analysis:

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 competition.

Chicago Board of Trade v. United States,

246 U.S. 231, 238, 38 S.Ct. 242, 244, 62

L.Ed. 683 (1918).

The activity engaged in by the Dow

Jones defendants was the publication of

truth and opinion of the sort described

above. Even assuming a combination of

the press and a competitor of plaintiff

such as plaintiff alleged, this cannot be

the kind of activity which Section 1 of the

Sherman Act was designed to prevent.

This sort of behavior is far removed from

a paradigmatic trade restraint such as

price-fixing undertaken by a group of

competitors against a fellow competitor.

Moreover, it is an article of national faith

that on balance the free flow of truth and

reasoned opinion enhances competition.

Hence the Dow Jones defendants have not

engaged in any unreasonable restraint of

trade.

{7} Ill. THE PENDENT STATE

CLAIMS. The court declines to exercise

jurisdiction over the pendent state claims

as to the Dow Jones defendants for two

reasons. First, the application of Va.Code

$18.2-500! to press defendants could raise

10. In pertinent part, §18.2-500(a) reads:

Any person who shall be injured in

his reputation, trade, business’ or

profession by reason of a _ violation of

§18.2-499, may sue therefor and recover

three-fold the damages by him sustained,

and the costs of suit, including a

reasonable fee to plaintiff's counsel; and

without limiting the generality of the term,

"damages" shall include loss of profits.

In pertinent part, §18.2-499 provides:

(a) Any two or more persons who

shall combine, associate, agree, mutually

undertake or concert together for the

purpose of wilfully and maliciously injuring

another in his reputation, trade, business

or profession by any means whatever, or

for the purpose of wilfully and maliciously

compelling another to do or perform any

act against his will, or preventing or

hindering another from doing or

performing any lawful act, shall be jointly

and severally guilty of a Class 3

misdemeanor. Such punishment shall be in

addition to any civil relief recoverable

under §18,2-500.

(b) Any person who attempts to

procure the _ participation, cooperation,

agreement or other assistance of any one

or more persons to enter into any

combination, association, agreement, mutual

understanding or concert prohibited in

substantial constitutional questions from

which the court. believes it should

abstain. Cf. New York Times Co. v.

Sullivan, 376 U.S. 254, 279-80, 84 S.Ct.

710, 725-726, 11 L.Ed.2d 686 (1964)

(public-official plaintiff must prove actual

malice in defamation action). The lack of

guidance from the_ state courts on

interpretation of the statutory terms -- for

instance, whether the term "maliciously"

refers to "legal malice" or "actual malice"

-- exacerbates the difficulties of

application. Second, now that the federal

subsection (a) of this section shall be

guilty of a violation of this section and

subject to the same penalties set out in

subsection (a) hereof,

11, Because the court grants summary

judgment to the Dow Jones defendants on

the federal counts on _ nonconstitutional

grounds and declines jurisdiction over the

state counts, it takes no position on the

merits of the constitutional arguments they

have raised.

counts are no longer in the case against

Dow Jones, the court has doubts regarding

the propriety of applying Virginia law as

between parties whose principal places of

business are Florida (SafeCard) and New

York (Dow Jones). Hence the court will

dismiss the state counts without prejudice

by the accompanying order.

THE CCSC DEFENDANTS

{8} For the reasons stated above,

and because the CCSC defendants did not

make the statements upon which SafeCard's

§10(b) claim is premised, the court grants

summary judgment to the CCSC defendants

on Count I.

[9] The Sherman Act §1 and §2

claims and the pendent claims survive the

motion for summary judgment as to the

CCSC defendants, because issues of mate-

rial fact remain. The §1 count remains in

the case insofar as plaintiff is able to

prove that Ferry and/or Hurney conspired

with CCSC,

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No, 82-1487

SafeCard Services, Inc., Appellant,

Vv.

Dow Jones and Company, Inc.

Credit Card Services Corp.,

Alan Abelson, Steven Anreder,

John P, Ferry and Walter

Hurney, Appellees.

No, 82-1528

SafeCard Services, Inc., Appellee,

Vv.

Dow Jones and Company,

Inc., Alan Abelson and

Steven Anreder, Defendants,

and

Credit Card Services

Corp., John P. Ferry and

Walter Hurney, Appellants.

Appeals from the United States District

Court for the Eastern District of Virginia,

at Alexandria. Richard L. Williams,

District Judge.

Argued: Decided:

March 9, 1983 March 31, 1983

Before RUSSELL and HALL, _ Circuit

Judges; and HAYNSWORTH, Senior Circuit

Judge.

Hugo Black, Jr. (Kelly, Black, Black &

Earle, °.A. on brief) for Appellant;

Michael B. Mukasey (Ann Loeb, Patterson,

Belknap, Webb & Tyler on brief) for

Appellees Dow Jones & Company, Inc.,

Alan Abelson and _ “Steven Anreder;

David G. Fiske (John E. Coffey, Susan L.

Rogers, Thomas & Fiske, P.C. on brief)

for Appellees Credit Card Services Corpo-

ration.

PER CURIAM:

SafeCard Services, Inc. appeals from

a district court order granting summary

judgment in favor of the defendants Dow

Jones & company, Inc., Alan Abelson and

Steven Anreder, and partial summary

judgment in favor of Credit Card Service

Corporation, John P. Ferry and Walter

Hurney.* After reviewing the record and

hearing the oral arguments of counsel, we

conclude that for reasons _ sufficiently

appearing in the district court opinion we

affirm.

AFFIRMED

. The parties stipulated to a voluntary

dismissal without prejudice of the remain-

ing claims under Fed.R.Civ.P.

41(a)(1) (ii).

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.