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PRINTER II, INC. v. PROFESSIONALS PUBL.

July 9, 1985

PRINTER II, INC., Plaintiff,
v.
PROFESSIONALS PUBLISHING, INC., Defendants



The opinion of the court was delivered by: SWEET

SWEET, D.J.

This is a diversity action in which plaintiff Printers II, Inc. ("Printers II"), a District of Columbia corporation, seeks to recover sums owing as a result of its printing the third issue of "Physicians' Travel & Meeting Guide" (the "Guide"), a publication of defendant Professionals Publishing, Inc. ("Pro Pub"), a Nevada corporation with offices in New York City. Judgment will be entered in favor of Printers II upon the facts and conclusions set forth below.

The action was bifurcated as determined in prior opinions, and the nonjury portions were tried to the court by skilled and able counsel on April 1, 4-5, 9-11 and May 13-15, and finally submitted on June 3, 1985. The evidence establishes a course of dealing between the parties that was initiated in trust and confidence and that dissolved under financial pressures in a relatively short time into charges of chicanery and dilatory tactics. As a consequence, a resolution which should have been reached by sensible businessmen has become the subject of a court decree, to the advantage of neither side. The inability to deal rationally with each other may well have resulted from the similarities of the firms, their structures, and their initial relationship, which was described by one witness as symbiotic.

 Printers II operates its commercial printing business in Tuxedo, Maryland with 225 employees operating seven presses, a bindery and certain preprinting processes, six days a week, twenty-four hours a day. Eighty percent of its ownership is held equally by the President, Robert Saum, Jr. ("Saum") and its Vice President Melvin Galloway ("Galloway"), who may be broadly termed the Mr. Inside and Mr. Outside, respectively, of the business.

 Pro Pub is the brainchild of Stephen Salinger ("Salinger"), who is the publisher of the Guide and has been, among other things, an associate professor of English, engaged in the jewelry business, and the publisher of "Playground," a publication describing events and facilities in the Virgin Islands, Salinger's residence during its publication. Salinger is the Chief Executive Officer of Pro Pub, a Nevada corporation not qualified to do business in New York but with offices here. Alexander Londine ("Londine") is its President. pro Pub commenced business in 1982 by publication of the Guide.

 The Guide is a glossy publication similar in appearance to "Travel and Leisure." It contains a listing of meetings, symposia, and seminars for doctors, described as medical Event Data, which includes the dates, places and purposes of the events categorized. Editorial matter, articles and advertising are also included. Advertising is the principal source of revenue for the Guide, which has a subscription price of $20 an issue but which is mailed to non-subscribers as well.

 The relationship between Saum and Salinger commenced satisfactorily with the printing of "Playground" by Printers II starting in 1980. When Salinger devised his plan for the Guide he discussed it with Saum, received quotes, and on January 21, 1983, 175,000 copies of the first issue of the Guide, consisting of 136 pages, was mailed.

 In June and July, 1983 the second issue entitled Summer/Fall 1983 was printed by Printers II and mailed. The second issue consisted of two editions: the pharmaceutical version, which was intended for prescription writing doctors and the consumer version, which was geared to the remainder of the profession. The editorial content of each version was the same, but the advertising in the pharmaceutical version was greater, since certain of the ethical drug manufacturers restrict their advertising to only the prescription writing doctors. One-hundred fifty-five thousand copies of the 120-page consumer version and 135,000 copies of the 168-page pharmaceutical version were mailed by July 5, 1983.

 Payments to Pro Pub by the advertisers were based in part on circulation figures, a factor which inhibited Pro Pub's ability to pay Printers II invoices on time or, in certain instances, within the 90 days required by the terms of the invoices. This was of concern to Printers II, who submitted the invoices to its bank in order to obtain financing. In the event of nonpayment within 90 days by Pro Pub, the credit arrangement between Printers II and its bank required a reduction in credit in the amount of the overdue payment. To obviate this problem, Printers II obtained a promissory note on May 31, 1983 as payment from pro Pub in connection with certain of the invoices rendered with respect to the second issue. The promissory note was paid in full on July 20.

 On October 1, 1983 Pro Pub gave a second promissory note in connection with the second issue, which it paid on December 13 with interest in a total amount of $196,127.76. In effect, Printers II was being financed by its bank to enable production of the Guide since certain of the Guide's receipts were deferred. The relationship was understood by both parties. Printers II rendered invoices, and when requested by pro Pub gave statements relating to the Guide's circulation, neither of which acts reflected all the facts entirely accurately, but were designed in each instance for third-party use.

 These arrangements, though understood, were not the subject of any contract or bid subsequent to the first issue. No complaints were raised with respect to Printers II work or billing practice. Salinger was, however, dissatisfied with some of the paper used for the second issue and in August, 1983 met with Printers II employees on the subject in order to resolve the problem. One employee of Printers II was Wally Doerk ("Doerk") in whom Salinger reposed trust. It was he who brought the parties together initially, and it was he who had primary responsibility at Printers II for the Pro Pub account, which was becoming a, if not the, principal account of Printers II. When the relationship between Saum and Salinger began to deteriorate, Doerk left Printers II and become a consultant for Pro Pub. Neither side called him as a witness.

 During the August 1983 meeting on the subject of paper, Salinger met with Doerk and a Printers II employee, Rick Saum, and obtained prices for different paper stocks. He then went upstairs to Robert Saum's office where the selection of the paper to be used was discussed. The shortage of paper was considered, and it was concluded that an early purchase would be desirable. Saum advised Salinger that pro pub would be invoiced when "the paper hit the floor." Saum gave paper prices to Salinger that were higher than had been quoted by Printers II employees downstairs. Saum also gave Salinger a formula to estimate the costs of paper relative to the number of pages produced. Salinger testified that he believed the prices quoted by Saum to be the price to Pro Pub for the paper to be purchased. No such statement was made, however, and there was no agreement as to the cost of the paper to Pro Pub, particularly in view of the fact that it had not yet been purchased.

 Although it had not been set forth during dealings between the parties over "Playground" and the first two issues of the Guide, it had been the practice of Printers II to bill for prep charges, that is, charges for the preparation of plates and similar activities, for paper, for printing, for binding, and for delivery and mailing. Initially, certain of the prep charges were performed by Printers II affiliates, but Salinger was dissatisfied with the work performed and made arrangements [arrangements] for certain of the data processing to be done elsewhere. When Printers II had work performed by outside contractors, a markup was added, a practice which obtained with respect to the cost of paper to Printers II. The printing costs were calculated by a computing process which was based on the number of employees, presses and time involved, as well as a markup.

 On October 20 the paper purchased for the third issue was invoiced to Pro Pub in the amount of $97,435.00 in accordance with the parties' understanding. The invoice contained a markup over the cost to Printers II and was forwarded to Printers II's bank for ...


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