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SOAP OPERA NOW, INC. v. NETWORK PUB.

May 30, 1990

SOAP OPERA NOW, INC., PLAINTIFF,
v.
NETWORK PUBLISHING CORPORATION D/B/A SOAP OPERA DIGEST, DEFENDANT.



The opinion of the court was delivered by: Robert J. Ward, District Judge.

OPINION

In a Memorandum Decision filed May 24, 1988, this Court granted the motion of plaintiff Soap Opera Now, Inc. ("SONOW") for a preliminary injunction requiring defendant Soap Opera Digest and its publisher Network Publishing Corporation (collectively, the "Digest") to include plaintiff's advertisements in Soap Opera Digest. The parties subsequently completed discovery, and defendant now moves for summary judgment pursuant to Rule 56, Fed.R.Civ.P. For the reasons that follow, the Court vacates the preliminary injunction, grants defendant's motion for summary judgment with respect to plaintiff's antitrust claims, and dismisses the pendant state claim for lack of subject matter jurisdiction.

BACKGROUND

The history of the instant litigation is both varied and contentious. Soap Opera Now is a six-page, black and white weekly newsletter, published out of the home of one of plaintiff's principals, which focuses on daytime soap opera news, gossip and coming attractions. Its readership has ebbed and flowed from month to month since its inception in 1983, ranging during 1987, the year preceding the commencement of the instant action, from 5,209 to 6,728. Soap Opera Digest is a well-known bi-weekly, 150-page color soap opera magazine with 350,000 subscribers and a readership of 1,050,000.

From 1983 until November 1987, plaintiff advertised its newsletter in the Digest. During those years, the relationship between the parties was somewhat stormy, with the Digest from time to time threatening to terminate SONOW's ads and imposing various conditions on their continued publication. In November of 1987, the Digest cancelled plaintiff's advertisements, and thereafter, on February 16, 1988, plaintiff moved by order to show cause for a preliminary injunction requiring the Digest to publish SONOW's ads. In its complaint, SONOW alleged that the Digest was guilty of an illegal attempt to monopolize trade in violation of § 2 of the Sherman Antitrust Act of 1890, as amended, 15 U.S.C. § 2 (1982), and damages resulting therefrom.*fn1 In addition, the complaint alleged that the Digest, by its refusal to publish SONOW's ads, had breached an alleged contract between the parties.

According to plaintiff, the Digest is the dominant entity in the relevant market, which it defines as "the market for the mass dissemination of soap opera news," consisting of "subscribers and potential subscribers of soap opera publications." Plaintiff's Memorandum of Law in Opposition to Defendant's Motion for Summary Judgment, filed December 8, 1988, at 9 ("Plaintiff's Opposition Brief"). Plaintiff contends that the Digest's share in this market is approximately 80 percent. Defendant, on the other hand, asserts that the relevant market should be more broadly defined to include general interest publications that regularly feature soap opera news, such as TV Guide. Thus, it claims, the market share of the Digest is not nearly so great as alleged by plaintiff. Further, defendant argues that plaintiff has failed to present any evidence to support its claim that it and the Digest are in the same relevant market.

Defendant has submitted evidence suggesting that no barriers exist to entry into the relevant market, even as narrowly defined by plaintiff. It is undisputed that the actual product — soap opera news — is readily available to potential publishers from the networks. In addition, in order to start a newsletter one needs only "good writers, an organization to produce and assemble it and mail it promptly and access to a place to promote it." Appendix to Defendant's Motion for Summary Judgment at 216 ("Def. App.") (Deposition of Kenneth Stein). In fact, SONOW was begun with a very small initial capital investment. It is further undisputed that several soap opera publications, in addition to the Digest, have either existed for several years or have recently been started. These publications do not advertise in the Digest. Plaintiff, however, asserts that the competing publications are either very small, very unstable, or infrequently published in comparison to the Digest.

The gravamen of plaintiff's claim is that it will be unable to compete successfully, or indeed to survive, in the relevant market unless it is able to advertise SONOW in the pages of the Digest. Thus, plaintiff argues that the Digest's advertising pages constitute an "essential facility" in the relevant market. According to plaintiff, past attempts to promote its product in other media have been unsuccessful. Although SONOW concededly places ads in some of the smaller and newer soap opera magazines, it claims that these are not sufficient to maintain it as a viable entity for any length of time, although it admits that ads placed in a recent market entrant, Soap Opera Update, have been profitable. SONOW has never done demographic or market studies in an attempt to discover alternate methods of reaching its target audience, which it defines as soap opera "fanatics." It is plaintiff's contention that all of these "fanatics" read the Digest, and indeed that all of its readers are also Digest readers.

Defendant insists that, even if plaintiff were able to demonstrate that the Digest has monopoly power in the relevant market, it is not an essential facility both because other competitors in the market are able to survive without advertising in the Digest, and because there exist alternative methods by which SONOW can reach its audience — namely, those methods used by the Digest itself, as well as other promotional techniques available to newsletters, including direct mailings and flyers. The Digest intimates that SONOW's out-of-hand rejection of various alternate marketing vehicles is insufficient to support the instant claims, and demonstrates only that SONOW wishes to take advantage of the Digest's aggressive marketing techniques by reaching its readers without investing the resources that other competitors in the market must expend.

Plaintiff's antitrust claims ultimately rest on its contention that a black and white newsletter such as SONOW, which contains no advertising pages and has a relatively tiny circulation, cannot survive as a viable entity using the same types of promotion and marketing techniques as the Digest, a "gorgeous" four-color magazine. According to plaintiff, the only way that a small newsletter such as Soap Opera Now can remain a viable competitor in the market for the mass dissemination of soap opera news is to reach its target consumers by advertising in the publication which plaintiff insists they all read — the Digest.

DISCUSSION

I. Summary Judgment.

The standards for granting summary judgment in this Circuit are well-established. A court may grant this extraordinary remedy only when it is clear both that no genuine issue of material fact remains to be resolved at trial and that the movant is entitled to judgment as a matter of law. In deciding the motion, the Court is not to resolve disputed issues of fact, but rather, while resolving ambiguities against the moving party, to assess whether material issues remain for the trier of fact. Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-50, 106 S.Ct. 2505, 2509-11, 91 L.Ed.2d 202 (1986)). Only where the entire record would inevitably lead a rational trier of fact to find for the moving party is summary judgment warranted. National Railroad Passenger Corp. v. City of New York, 882 F.2d 710 (2d Cir. 1989).

Although the movant faces a difficult burden to succeed, motions for summary judgment, properly employed, permit a court to terminate frivolous claims and defenses, and to concentrate its resources on meritorious litigation. Knight v. U.S. Fire Ins. Co., supra, 804 F.2d at 12. The motion thus:

  is properly regarded not as a disfavored
  procedural shortcut, but rather as an integral
  part of the Federal Rules as a whole, which are
  designed "to secure the just, speedy and
  inexpensive determination of every action." Fed.
  Rule Civ. Proc. 1. . . . Rule 56 must be
  construed with due regard not only for the rights
  of persons asserting claims and defenses that are
  adequately based in fact to have those claims and
  defenses tried to a jury, but also for the rights
  of persons opposing such claims and defenses to
  demonstrate in the manner provided by the Rule,
  prior to trial, that the claims and defenses have
  no factual basis.

Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986).

While the party seeking summary judgment bears the initial burden of demonstrating the lack of material factual issues in dispute, Schering Corp. v. Home Ins. Co., 712 F.2d 4, 9 (2d Cir. 1983), "[t]he non-movant, . . . who must sustain the ultimate burden of proof, must demonstrate in opposing the summary judgment motion that there is some evidence which would create a genuine issue of material fact." Delaware & Hudson Railway Co. v. Consolidated Rail Corp., 902 F.2d 174, 177-178 (2d Cir. 1990) (citing Celotex Corp. v. Catrett, supra, 477 U.S. at 322-23, 106 S.Ct. at 2552). "Conclusory allegations will not suffice to create such a genuine issue. There must be more than a `scintilla of evidence', Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986), and more than `some metaphysical doubt as to the material facts.' Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986)." Twin Laboratories, Inc. v. Weider Health & Fitness, 900 F.2d 566, 568 (2d Cir. 1990). With the foregoing principles in mind, the Court turns to the instant motion.

II. The Antitrust Claims.

Plaintiff's amended complaint contains two substantive antitrust counts, consisting of a claim of illegal monopolization and a claim of attempted monopolization, both in violation of § 2 of the Sherman Antitrust Act, 15 U.S.C. § 2 (1988). The amended complaint alleges that the Digest attempted to monopolize the market for soap opera publications by refusing to deal with plaintiff, and that the Digest illegally monopolized this market by its refusal to deal. Both of its antitrust claims thus rest entirely upon plaintiff's assertion that, because of its position in the alleged relevant market, defendant had a duty to deal with SONOW and thus that its refusal to deal constitutes anticompetitive or exclusionary conduct in violation of section 2.*fn3 Because of the confusion that often surrounds this area of law, and the consequent ease with which a "plaintiff denied access to a firm's goods, services or resources may characterize that which he desires as an `essential facility' and claim that its denial violates the antitrust laws," P. Areeda & H. Hovencamp, III Antitrust Law 677 (1988 Supp.), it is instructive first to set out the basic contours of the law regarding refusals to deal.

It has been said that questions concerning the circumstances under which a single firm monopolist has a duty to deal with other firms are some of the "most unsettled and vexatious in the antitrust field." Byars v. Bluff City News Co., Inc., 609 F.2d 843, 846 (6th Cir. 1979). In various cases, courts have found refusals to deal by single firm monopolists actionable under § 2. In the context of a claim of illegal monopolization, a refusal to deal may constitute a form of "willful acquisition or maintenance of [monopoly] power," satisfying the second element of a monopolization claim. See White Directory of Rochester, Inc. v. Rochester Telephone Corp., 714 F. Supp. 65, 69 (W.D.N.Y. 1989).*fn4 A refusal to deal with a competitor may also comprise an element of a claim of attempted monopolization under ยง 2. See, e.g., Twin Laboratories, Inc. v. Weider Health & Fitness, supra, ...


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