The opinion of the court was delivered by: NEAHER
MEMORANDUM OF DECISION AND ORDER
This is the second round of a controversy between News Group Publications, Inc., publisher of the New York Post ("the Post"), and a group of retail distributors (hereinafter "plaintiffs") who undertook home delivery (by carrier boys) of the Post in areas of Kings, Queens, Nassau, and Suffolk Counties formerly served by the defunct Long Island Press. In the first round the Court granted defendants' motion in limine, ruling that on the facts then before it, the 60/40 price split, which applied if the suggested home delivery retail price of $1.25 were to be increased by the retailers, was not illegal price fixing. See Martindell v. News Group Publications, Inc., 580 F. Supp. 330 (E.D.N.Y. 1984). The case is again before the Court upon the defendant Post's motion to dismiss pursuant to Fed. R. Civ. P. 41(b).
After hearing plaintiffs' evidence contra dismissal and reviewing the exhibits, the following constitutes the Court's findings and conclusions pursuant to Fed. R. Civ. P. 52(a).
Ten of the plaintiff retail dealers appeared and testified in opposition to the Post's motion, and an eleventh, Clifford Rosenberg, gave his testimony by deposition. The remaining seven plaintiffs including Robert Martindell who initiated the action failed to appear. Essentially, the plaintiffs who appeared welcomed the efforts of the Post to replace the Long Island Press in an area already served by the New York Daily News and the New York Times, but disagreed with and resisted the Post's pricing suggestions designed to attract subscribers for home delivery and increase its circulation as against its better known competitors.
All the plaintiffs who appeared had many years of experience delivering the Long Island Press and were well aware of the problems which caused that paper to fold. All readily acknowledged that had the Post not taken over, their delivery routes would probably have been worthless. Their apparent leader was Richard Dennis, who testified that he was formerly employed by the Long Island Press in purchasing franchise areas until the Post took over, and had his own franchise routes embracing some 2,360 customers on the side. According to Dennis, when the Post took over in March 1979 he became acting section head supervising the franchised dealers. This arrangement was at the direction of Sieg Friedler, who had been a circulation manager for the Long Island Press, and continued until 1981. Dennis received no salary, deriving his income from his own franchise routes.
Following the practice of the Long Island Press, the Post required Dennis and the other retail dealers to enter into a "News Dealer Agreement." see Def.'s Exh. D-1, which Dennis and the others signed in or about May 1977. The agreement provided that the Post would designate a distributor who would sell and deliver the newspapers to the news dealer "at such rates as shall be agreed upon, from time to time, between the Distributor and the News Dealer." Id. There were three such distributors, whose names appeared in the caption, viz., Crescent News Distributors, Woodhaven News Company and Long Island News Corp. Woodhaven has since gone out of business and Crescent has been merged into Long Island News Corp. Moreover, effective October 30, 1978, the Post undertook to sell the newspaper directly to the retail dealers, although the distributors would "continue to deliver the newspaper [in bulk to the dealers] and collect the payments due as agents for the New York Post Corporation." Def.'s Exhs. A and B.
In an effort to attract former Long Island Press subscribers, the Post in March 1977 initially announced a 75 cents price for six days home delivery. This was half of the daily newstand price of 25 cents a copy, i.e., $1.50 for the week. From the 75 cents price the retail dealers received 60 cents a copy and the home delivery carriers 15 cents. That promotional effort lasted until May 1978 when the Post increased the home delivery price to $1.00, still one-third less than the newsstand price. Def.'s Exh. C. At that juncture, Dennis, Clifford Rosenberg and some of the other plaintiffs decided to add a service charge to the Post's advertised price. Dennis charged home subscribers $1.10 a week, and Rosenberg raised his to $1.15, accompanied by a "NEW YORK POST NEWSLETTER" plaintiff Posa had composed, which stated that it would aid the Post "to continue to print a bigger and better paper." Exh. 8 to deposition of Clifford Rosenberg.
The Post did not sponsor the Rosenberg-Posa letter; however, on October 30, 1978 it notified all dealers in Queens, Brooklyn, Staten Island and Westchester, Nassau and Suffolk Counties that it would sell the Post directly to the dealers, although the distributors would continue to deliver the newspapers in bulk to the dealers and collect payments due as agents for the New York Post Corporation. Def.'s Exhs. A and B. In the same notices, dealers were advised that "the suggested retail price" for weekday home delivery would be $1.25 and $.35 for the Sunday issue, and that the dealers would be charged $.77 for the weekday issues and $.25 for the Sunday issue, plus 60% of the total price in excess of $1.25 charged by the dealer for the weekday issues. Def.'s Exhs. A and B. The legality of that pricing formula was upheld by this Court in the prior in limine proceeding. 580 F. Supp. at 330-31. Dennis, Rosenberg and other plaintiffs continued to increase their home delivery prices above the Post's suggested prices, with the result that a number of customers complained to the Post that they were being overcharged and cancelled their subscriptions. Dennis testified that his circulation dropped from 1,743 newspapers to 1,375 after he raised his price to $1.40 in October 1978. In March 1980, when the Post had raised its home delivery price to $1.65, Dennis raised his price to $1.80, with the result that his circulation further decreased to 555, although a portion may have been due to his sale of some 300 customers to another dealer. In February 1981 he had only 480 customers. The Post did not renew his contract in May 1981, notifying him that he was in violation of his dealer agreement because he was also distributing the "Tonite" edition of the New York Daily News.
Rosenberg testified that when he started with the Post in March 1977 he had 900 to 1,000 customers but lost some 200 to 300 by 1979 when he was terminated. He also complained of pressure from Sieg Friedler, who said Rosenberg might be terminated if he did not drop the service charge. However, he continued to receive delivery of the Post even though he had suffered a serious accident in 1978 which required that he turn over active charge of distribution to his teen-age son. Eventually, Rosenberg's annual contract was not renewed in May 1979. By that time, however, Rosenberg had turned his attention to a new business, selling pretzels to schools in his area.
Plaintiff John Goncharuk distributed the Long Island Press in Levittown, East Meadow, and North Bellmore in Nassau County. He commenced delivery of the Post after the last day of Press publication and was told at a general meeting, where section heads of the Post and Press were present, to charge $.75. There was no discussion of how long this price would last nor mention of changing it. In May 1977 he signed a news dealer contract with the Post. Thereafter, he agreed to charge the suggested price because he was warned that he would lose his district and subsidy if he did not. Over time, circulation declined, which resulted in a cut in the subsidy.
In 1982 Goncharuk raised his price to $2.40 for about 100 customers on a motor route and lost a few customers. There were threats from the Post, with which he is still under contract, to drop the price. Undoubtedly, to discredit this point, Goncharuk was shown Defendant's Exh. UU, a form sent by the Circulation Department to customers who have discontinued service. Apart from printed information relating to the discontinuance, the lower left hand corner bears the following in a red ink stamp,