Berlyn Incorporated v. The Gazette News (4th Cir. 2003)

Decided: August 18, 2003 Before WILKINS, Chief Judge, and GREGORY and SHEDD, Circuit Judges. Affirmed by unpublished opinion. Judge Gregory wrote the opinion,

in which Chief Judge Wilkins and Judge Shedd joined.

COUNSEL ARGUED: George William Liebman, Baltimore, Maryland, for

Appellants. Arthur Douglas Melamed, WILMER, CUTLER & PICK-

ERING, Washington, D.C., for Appellees. ON BRIEF: Melvin J. Sykes, Baltimore, Maryland, for Appellants. Ali M. Stoeppelwerth,

Kyle M. DeYoung, WILMER, CUTLER & PICKERING, Washing-

ton, D.C.; David P. Donovan, WILMER, CUTLER & PICKERING,

Tysons Corner, Virginia; Charles O. Monk, II, Daniel R. Chemers,

Gretchen L. Klebasko, Patrick E. Clark, SAUL EWING, L.L.P., Bal-

timore, Maryland, for Appellees.

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c). OPINION GREGORY, Circuit Judge: I Berlyn, Inc., et al., a group of community-oriented, weekly-

newspaper publishers, filed suit in federal district court against the

Washington Post Company, et al., alleging multi-tiered violations of

federal and state antitrust laws, along with claims of unfair competi-

tion, breach of contract, and tortious interference with contract. The

defendants filed a motion for summary judgment, pursuant Rule 56(c)

of the Federal Rules of Civil Procedure. The district court granted the

defendants' motion as to all claims, and dismissed the case. For the

reasons stated below, we affirm. 1

On March 4, 2003, Appellees filed a Motion to Strike. Insofar as the

motion seeks to strike Appellants' proposed addendum to their reply

brief, the motion is granted. The motion is denied in all other respects.

Additionally, this court denies Appellants' request for costs related to the

preparation of its Motion to Strike and its Motion to Have Joint Appen-

dix Corrected.

A The plaintiffs are Berlyn, Inc., ("Berlyn") Montgomery Sentinel

Publishing, Inc., ("Montgomery Sentinel") and Kenneth C. Rossignol

("Rossignol")(collectively, "Appellants"). Berlyn is owned by Lynn

and Bernie Kapiloff, and publishes the Prince George's County Senti-

nel . Montgomery Sentinel publishes the Montgomery County Senti-

nel . Rossingol is a self-described "one-man band" who publishes and

produces the St. Mary's Today , in St. Mary's County, Maryland. Each

of Appellants' newspapers are small, weekly, paid, community news-

papers. For example, from 1997 to 2000, the St. Mary's Today 's total

annual profits ranged from a low of $1,157 to a high of $16,138.

The defendants are the Washington Post Company ("Post Com-

pany"), the Gazette Newspapers, Inc. ("Gazette"), and the Washington

and Baltimore Suburban Press Network, Inc., ("Press Net-

work")(collectively, "Appellees"). The Post Company publishes the

Washington Post , which includes a weekly single section supplement

dedicated to local news coverage (the "Extra"). Gazette publishes

forty-four distinct weekly, community newspapers in the Washington,

D.C. metropolitan area, and is a wholly-owned subsidiary of the Post

Company. In addition, Gazette owns fifty percent of the Press Net-

work, which is an organization designed to provide advertisers with

one-stop shopping for placing ads in a series of local papers through-

out the region. Appellants' complaint centers on two incidents, both

of which are summarized below: the Press Network's activities in

Prince George's County, and Gazette's acquisition of the Southern

Maryland Division of the Chesapeake Publishing Corporation

("Chesapeake"), an organization that published community newspa-

pers.

In 1992, Gay Nuttall, the founder of the Press Network, asked sev-

eral area newspapers, including the Prince George's Sentinel , if they

would become members of the Press Network. In particular, she told

Lynn Kapiloff that the Prince George's Sentinel would "be her paper"

in Prince George's County, meaning that the Sentinel would be the

only newspaper in that county that would be a member of the Press Network. Nuttall and Kapiloff did not enter into any written contract,

and the details of their oral exclusivity agreement were vague. The

agreement, for example, did not include any time limitation, although

Lynn Kapiloff assumed that the agreement would run "forever."

Additionally, the agreement did not specify what would be required

of the Sentinel ÃƒÂƒÂ e.g., whether it might be required to maintain a cer-

tain level of circulation or a certain level of publication quality.

In 1995, the Prince George's Sentinel had not improved as Nuttall

had expected, and she began looking for other Prince George's

County newspapers to include in the Press Network. She went to sev-

eral publishers, including Chuck Lyons, the publisher of Gazette's

newspapers. At the time, Gazette was enjoying considerable success

in Montgomery County and other areas, but was not yet established

in Prince George's County. In October of 1997, Gazette decided to

enter Prince George's County, first with the Greenbelt/College Park

Gazette , and with other publications soon thereafter. By 1998, the

Greenbelt/College Park Gazette was profitable. Nuttall believed that

Gazette's success proved that it would be a superior product for her

advertisers. Since the advertisers were the clients who were paying

for her service, her objective was to do the best that she could for

them. Thus, by late 1997, the Press Network began presenting busi-

nesses with the choice of either advertising in the Prince George's

County Sentinel or the Prince George's County Gazette . When asked

to provide a recommendation, the Press Network's salespersons rec-

ommended Gazette newspapers.

Appellants, of course, offer a different account of the events. They

insist that Gazette and the Press Network conspired to eliminate com-

petition for Gazette in Prince George's County by: (1) orchestrating

Gazette's entry into the county; (2) pressuring advertisers to choose

Gazette over the Prince George's County Sentinel ; and (3) conspiring

to give Gazette preferred treatment on the rate cards the Press Net-

work provided to advertisers.

The second major incident that forms the basis for this lawsuit is

Gazette's acquisition of the Chesapeake's Southern Maryland Divi-

sion. In October of 2000, Chuck Lyons learned that the Southern

Maryland Division was for sale. Lyons thought the Southern Mary-

land Division's assets would compliment Gazette's existing opera-

tions. Thus, Gazette submitted a formal bid to buy Chesapeake for

$46 million, with funds loaned by the Post Company and booked to

Gazette as an intercompany payable.

Appellants argue that this acquisition adversely affected (or had the

potential to so affect) competition in Southern Maryland, including

Montgomery, Prince George's, and St. Mary's Counties. They allege

that the Post Company and Gazette now have a ninety-nine percent

market share in the three counties, and that the Post Company and

Gazette acquired Chesapeake's Southern Maryland Division as an

intentional step toward seizing monopoly power. B Based on all of these activities, Apppellants filed suit in federal dis-

trict court alleging violations of Sections 1 and 2 of the Sherman Act

(15 U.S.C. 1 and 2), Section 7 of the Clayton Act (15 U.S.C. 18),

and Section 11-204(a)(1) of the Maryland Antitrust Act. In addition

to their federal and state antitrust claims, Appellants asserted causes

of action based on unfair competition, breach of contract, and tortious

interference with contract. Appellees filed a motion for summary

judgment, arguing that Appellants were unable to establish the rele-

vant product or geographic markets to support their antitrust claims.

On the state common-law claims, Appellees insisted that they were

entitled to summary judgment based on the insufficiency of Appel-

lants' evidence. The district court agreed with Appellees on all

grounds and dismissed the case. This appeal followed. III Before addressing Appellees' motion for summary judgment, we

must first consider Appellants' allegation that the district court erred

in refusing Dr. Thomas Overstreet, Appellants' proposed microecono-

mist, additional time to develop his opinion and offer evidence in

opposition to Appellees' motion for summary judgment. We review

this decision of the district court for abuse of discretion. United States

v. Jones , 136 F.3d 342, 349 (4th Cir. 1998).

Appellants' motion for leave to designate Overstreet as an expert witness provided, "If Defendants designate a microeconomist, Plain-

tiffs request leave to offer Dr. Overstreet as a rebuttal expert who

would testify on deposition and after the depositions of Defendants'

experts." (J.A. at 144.) That is, Appellants sought to offer Overstreet

solely as a rebuttal witness, and not as a expert witness in their case

in chief. The district court granted the motion, but clarified, "Al-

though plaintiffs may designate a `rebuttal' expert, that expert's testi-

mony may not be used in plaintiffs' case in chief, nor may it be relied

upon to support an opposition to any dispositive motion forthcoming

from the defendants." (J.A. at 182.)

It is well-settled that, "[o]rdinarily, rebuttal evidence may be intro-

duced only to counter new facts presented in the defendant's case in

chief. . . . Permissible rebuttal evidence also includes evidence

unavailable earlier through no fault of the plaintiff." Allen v. Prince

George's County , 737 F.2d 1299, 1305 (4th Cir. 1984) (emphasis

added). In light of this rule, the district court decided not to delay its

consideration of Appellees' motion for summary judgment by provid-

ing Dr. Overstreet with additional time to develop evidence that may

(or may not) have been useful to Appellants' case in chief. Because

Appellants never contended that Dr. Overstreet's testimony was

unavailable to them earlier through no fault of their own, the district

court found that any delay would be unwarranted. The court's ruling

on this matter was not an abuse of discretion. Accordingly, we affirm

the district court's decision, and turn our attention to Appellees'

motion for summary judgment. IV We review a district court's grant of summary judgment de novo .

See Thompson Everett, Inc. v. Nat'l Cable Adver., L.P. , 57 F.3d 1317,

3 (4th Cir. 1995). The Post Company, Gazette, and the Press Net-

work insist that they are entitled to summary judgment on Appellants'

antitrust allegations, which are as follows. First, Appellants allege that

the Press Network's exclusionary bylaws, which gave Gazette effec-

tive veto power over which newspapers could become members of the

Press Network, violated Section 1 of the Sherman Act. "To establish

a violation of § 1 of the Sherman Act, Plaintiffs must first show: "(1)

a contract, combination, or conspiracy; (2) that imposed an unreason-

able restraint of trade." Dickson v. Microsoft Corp ., 309 F.3d 193, 202

(4th Cir. 2002). In addition, they must also "prove the existence of

`antitrust injury,' which is to say injury of the type the anti-trust laws

were intended to prevent and that flows from that which makes defen-

dants' acts unlawful." Id. at 203 (internal citations omitted).

Second, based on Section 2 of the Sherman Act, Appellants allege

that Gazette and the Post Company have been engaged in an attempt

to monopolize, and they and the Press Network have conspired to

monopolize the community newspapers business throughout Southern

Maryland, including Prince George's and Montgomery Counties.

"Two elements comprise the offense of monopolization [under Sec-

tion 2 of the Sherman Act]: `(1) the possession of monopoly power

in the relevant market and (2) the willful acquisition or maintenance

of that power as distinguished from growth or development as a con-

sequence of a superior product, business acumen, or historic acu-

men.'" Oksanen v. Page Mem. Hosp. , 945 F.2d 696, 710 (4th Cir. 1) (citations omitted).

Third, Appellants allege that Gazette's acquisition of the Chesa-

peake's Southern Maryland Division violated Section 7 of the Clay-

ton Act. Section 7 prohibits any individual or organization from

acquiring "the whole or any part of the stock or other share capital"

of another organization where "the effect of such acquisition may be

substantially to lessen competition, or to tend to create a monopoly." U.S.C. § 18 (2003). In order to have standing to challenge a

merger under Section 7, a plaintiff must be able to show that he is

likely to suffer or has suffered an antitrust injury as a result of the

allegedly unlawful merger. Cargill, Inc. v. Monfort of Colorado , 479

U.S. 104, 122 (1986). "[T]hreatened loss from increased competition"

is not sufficient to meet this burden. Id. Lastly, Appellants allege violations of the Maryland Antitrust Act. "Section 11-204(a)(1) of the Maryland Act is essentially the same as

§ 1 of the Sherman Antitrust Act . . . ." Natural Design, Inc. v. Rouse

Co. , 485 A.2d 663, 666 (Md. 1984). Interpreting state antitrust law,

Maryland courts are to "`be guided by the interpretation given by the

federal courts to the various federal statutes dealing with the same or

similar matters.'" Id. (quoting Maryland Antitrust Act, § 11-202(a)).

Thus, Appellants state antitrust claims simply mirror their Sherman Act claims.

Two essential elements of Appellants' federal and state antitrust

claims are proof of the relevant product and geographic markets. 2 See

Service & Training, Inc. v. Data General Corp. , 963 F.2d 680, 683

(4th Cir. 1992) (Section 1 of the Sherman Act); White v. Rockingham

Radiologists, Ltd. , 820 F.2d 98, 104 (4th Cir. 1987) (Section 2 of the

Sherman Act); Barber & Ross, Co. v. Lifetime Doors, Inc. , 810 F.2d

6, 1279 (4th Cir. 1987) (Section 7 of the Clayton Act); Fed. Trade

Comm'n v. Food Town Stores, Inc. , 539 F.2d 1339, 1344 (4th Cir. 6) (Section 7 of the Clayton Act); Natural Design, Inc., v. Rouse

Co. , 485 A.2d 663 (Md. 1984) (Maryland Antitrust Act). That is, in

order to determine whether any antitrust violation has occurred, "we

must first define the relevant market because the concept of competi-

tion has no meaning outside its own arena, however broadly that

arena is defined. The plaintiff in an antitrust case bears the burden of

proof on the issue of the relevant product and geographic markets."

Satellite Television & Assoc. Res., Inc., v. Continental Cablevision of

Virginia, Inc. , 714 F.2d 351, 355 (4th Cir. 1983).

A relevant product market "is composed of products that have rea-

sonable interchangeability for the purposes for which they are pro-

duced . . . ." United States v. E. I. duPont de Nemours and Co. , 351

U.S. 377, 404. See also Satellite Television & Assoc. Res., Inc. , 714

F.2d at 356 (holding that a plaintiff must show "that commodities

[are] reasonably interchangeable by consumers for the same purpose"

within that market). For all of their antitrust claims, Appellants con-

tend that the product market consists of the legal and commercial

advertising services provided by weekly community newspapers and

the Post Company's Extra. Excluded from this proposed market are

other forms of print advertising, such as direct mail and fliers, along

with non-print media advertising on radio or local cable television. In

support of this product market, Appellants contend, "These products

[within the proposed market] are distinct from daily newspapers and

other print media (e.g., direct mail) as well as nonprint media, which

are much more costly and less focused on matters of local interest."

(Br. for Appellants, at 43.) Appellants note that an individual newspa-

Because we find that Appellants have failed to establish a relevant

product market, as explained below, we need not consider whether their

evidence is sufficient to establish the necessary geographic markets.

per reader would not consider radio, direct mail, or local cable televi-

sion as "reasonably interchangeable" with a community newspaper. 3

The flaw with this argument is that newspaper readers are not the

relevant consumers for the purposes of the duPont test. See 351 U.S. at 404. The consumers in this case are the advertisers, and from the

advertisers' perspectives, direct mail and other forms of advertising

may well be "reasonably interchangeable." With the proper consumer

in mind, we now consider the evidence that Appellants have mar-

shaled in support of their proposed product market.

The strongest of that evidence is as follows. First, Appellants' cite

to what appears to be an advertising flier produced by the Press Net-

work. 4 The one-page flier states, in part:

Press Network readers look to their suburban newspapers to

tell them where to find what they need at stores right in their

own neighborhoods, not across town or across the river.

They don't seek this kind of information on TV or radio.

They know that if they see a print ad, it's there to go back

Appellants also seek to rely on the testimony of their proposed expert

witness, Mr. James Shaffer. The district court correctly ruled, however,

that Shaffer is unqualified to offer expert testimony as an economist on

the establishment of relevant product or geographic markets. While Shaf-

fer has an MBA and significant executive experience in the newspaper

industry, he subscribes to no economics journals, and, as of the date of

his first deposition, could not name any economics journals. Needless to

say, he has not published any economics-related articles. He is also unfa-

miliar with basic terminology and concepts used by economists who

work on antitrust cases. Furthermore, Shaffer admitted that he had never

conducted a relevant market analysis, and that any reading he had done

on the subject came from materials provided to him by Appellants' attor-

neys.

We note that the document "appears to be" an advertising flier,

because Appellants have failed to lay a foundation for the introduction

of this document into evidence, and its origins are not clear. There are

similar admissibility problems with much of Appellants' documentary

evidence. Even assuming that this evidence would be admissible at trial,

however, it still fails to aid Appellants in their effort to establish a rele-

vant product market. to whenever they need it, without having to wait until the

next time a commercial airs. Print ads don't just make an

impression; they sell!

(J.A. at 1243.) Appellants claim that with this flier, the Press Network

has effectively conceded that TV and radio are not in the same prod-

uct market as print media. We, however, find that this flier tends to

prove exactly the opposite. By sending this flier out to local busi-

nesses, the Press Network appears to be trying to convince businesses

to spend their limited advertising resources on print ads, not on radio

or TV ads. Clearly, based on the fact that the flier goes to great

lengths to show how much better print media is than radio or TV, the

Press Network sees these other media outlets as key competitors.

Second, Appellants rely on a Washington Post Business Marketing

Strategy paper to show that the Post Company considers radio to be

a "medium that delivers lower total audiences but a higher concentra-

tion of specific `target groups,'" and that the "[a]dvertising costs have

increased substantially with local radio." (J.A. at 1262.) Again, if any-

thing, this evidence tends to show that all of these media outlets are

within the same product market, to the extent that they are competing

for the same limited pool of advertisers' dollars. The document

observes, for example, "More and more media are targeting slices of

the pie. Targeted media ÃƒÂƒÂ cable television, radio, community news-

papers, and the Internet ÃƒÂƒÂ have been the fastest growing in the past

five years." (J.A. at 1249.)

There is an additional, fundamental weakness with Appellants' def-

inition of the relevant product market. While their market definition

is underinclusive as explained above, it is also overinclusive, because

it places legal advertising in the same market as commercial advertis-

ing. Kenneth Baseman, the Post Company's expert witness,

explained:

The economics of legal advertising differs substantially

from the economics of other forms of advertising carried in

newspapers. The primary reason for this difference is that

circulation is very valuable to other forms of advertising, but

has either no value or very limited value to legal advertisers.

. . . Many legal advertisers are simply looking for the chea- pest way to meet a legal notice requirement. For these

advertisers, circulation has no value. They simply want the

cheapest newspaper that meets the requirements to be a

paper of record. This will often be a low circulation paper.

(J.A. at 2582.) Appellants have offered no evidence to rebut Base-

man's testimony on this point.

In sum, it is clear that Appellants have failed to meet their burden

to establish the relevant product market. Accordingly, the Post Com-

pany, Gazette, and the Press Network are entitled to summary judg-

ment on this ground alone, at least as to Appellants' claims relating

to the Maryland Antitrust Act, Section 2 of the Sherman Act, and Sec-

tion 7 of the Clayton Act. The failure to define a relevant product market is not necessarily

dispositive, however, of Appellants' claim under Section 1 of the

Sherman Act, as they have alleged a per se violation of the Sherman

Act based on the bylaws of the Press Network. In making this argu-

ment, Appellants suggest that the Press Network is an essential facil-

ity to operating a community newspaper in the Washington, D.C. area, and that the Press Network's exclusion of the plaintiffs would

be a per se violation of the Sherman Act. 5

There are three methods of analysis in the antitrust context: "(1) per

se analysis, for obviously anticompetitive restraints, (2) quick-look

analysis, for those with some procompetitive justification, and (3) the

full `rule of reason,' for restraints whose net impact on competition

is particularly difficult to determine." Dickson , 309 F.3d at 205 (quot-

ing Continental Airlines, Inc. v. United Airlines, Inc. , 277 F.3d 499,

(4th Cir. 2002)). Appellants point to only one allegedly anticom-

petitive effect of the Press Network's bylaws: that the bylaws allow

Gazette, as a fifty percent shareholder of the Press Network, to exer-

The elements of an essential facilities claim are: (1) control of the

facility by a monopolist; (2) a competitor's inability reasonably to dupli-

cate the facility; (3) denial of the use of the facility to a competitor; (4)

feasibility of providing the facility to the competitor. Laurel Sand &

Gravel, Inc. v. CSX Transportation, Inc. , 924 F.2d 539, 544 (4th Cir. 1).

cise veto power over who can become a member of the network,

thereby allowing Gazette to exclude any competing newspaper that it

wishes. Appellants have no evidence, however, to suggest that the

Press Network and Gazette have conspired to provide Gazette with

this power for any anticompetitive reason. In fact, it seems clear that

if Gazette did exercise its power in an anticompetitive manner, the

result would be a significant loss of business for the Press Network.

Businesses advertise through the Press Network only because it

provides them with one-stop shopping, allowing them to advertise in

several , different community newspapers without having to make

separate arrangements with each of those papers. If Gazette were to

bar all non-Gazette publications from joining the Press Network, the

network itself would become useless. It would be just as easy for

advertisers to go directly to Gazette, without having to donate a por-

tion of their advertising budgets to a middleman like the Press Net-

work. In short, the Press Network can only provide a useful service

to its consumers if there is a great deal of competition in the newspa-

per marketplace, with a diverse array of community newspapers in

which businesses may wish to advertise.

As a result, the procompetitive justifications for the Press Network

are readily apparent. The Press Network allows smaller community

newspapers who are members of the Press Network to more effec-

tively compete with other media outlets for advertisers' dollars in the

intensely competitive Washington, D.C. metropolitan area. The more

quality newspapers that the Press Network includes in its member-

ship, the more attractive its service becomes to businesses. Far from

having an anticompetitive effect, it appears that the Press Network

permits community newspapers to thrive in a marketplace that might

otherwise be reluctant to tolerate small publications that do not have

a presence throughout the entire Washington, D.C. region.

Accordingly, Appellants' attempt to allege a per se violation of the

Sherman Act fails, and the rule of reason analysis continues to apply

to all of Appellants' antitrust claims, including their Section 1 claim

under the Sherman Act. Because they have failed to establish a rele-

vant product market, as explained above, Appellants' claims under

Section 1 of the Sherman Act fail at the summary judgment stage,

along with their claims under Section 2 of the Sherman Act, Section

of the Clayton Act, and the Maryland Antitrust Act. V In addition to the antitrust claims discussed above, Appellants have

alleged breach of contract and tortious interference with contract

under Maryland law. Appellants base these allegations on their theory

that Kapiloff and Nuttall entered into a binding contract whereby the

Prince George's Sentinel would be the Press Network's exclusive

newspaper in Prince George's County. Kapiloff concedes that no

written document exists memorializing this agreement, and she fur-

ther concedes that Nuttall never stated that the Sentinel would be "her

paper" in perpetuity. In fact, it is logical to assume that Kapiloff's and

Nuttall's exclusivity agreement would continue only so long as it was

beneficial to both parties, which would require that the Prince

George's Sentinel meet Nuttall's reasonable expectations for the qual-

ity of the publication and the level of circulation in the county. The

Sentinel 's failure to meet these expectations justifies Nuttall's deci-

sion to sever the exclusivity agreement, assuming that one existed.

Accordingly, Appellants' claims of breach of contract and tortious

interference with contract must be dismissed.

Appellants have also stated a claim of unfair competition. To prove

unfair competition under Maryland law, a plaintiff must show that a

defendant damaged or jeopardized his or her business "by fraud,

deceit, trickery, or unfair methods...." Baltimore Bedding Co. v,

Moses , 34 A.2d 338 (Md. 1943). As the district court concluded, there

simply was no evidence of any fraud or collusion between the Press

Network, Gazette, and the Post Company. Accordingly, this claim

must also be dismissed. VI For the foregoing reasons, the district court's rulings are in all respects AFFIRMED.

Berlyn Incorporated v. The Gazette News (4th Cir. 2003)

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