interpreted in accordance with
federal precedent). A party asserting a violation of the Donnelly Act
must (1) identify the relevant product market, (2) describe the nature
and effects of the purported conspiracy, (3) allege how the economic
impact of that conspiracy is to restrain trade in the market in
question, and (4) show a conspiracy or reciprocal relationship between
two or more entities. Great Atlantic & Pacific Tea Co., Inc.,
997 F. Supp. at 352.
Cablevision argues that the Donnelly Act cannot be implicated, absent
allegations of conduct between one or more actors (hence, the
"arrangement" and "combination"), and as such, cannot apply to YES'
allegations of single firm, vertical conduct. Def.'s Mem. Law at 29-30;
Reply at 14-15. YES responds that the Act is broad enough to prohibit
"vertical restraints" and that, regardless, YES alleges a "combination
and arrangement between Cablevision and its affiliate MSG. . . . . as
well as supporting acts that seek to restrain competition . . ." Pl.'s
Mem. Law at 28-30.
The Supreme Court has found that a parent corporation and its
wholly-owned subsidiary are incapable of conspiring with each other due
to a presumed unity of purpose. See Copperweld Corp. v. Independence Tube
Corp., 467 U.S. 752 (1984). The central issue is whether an alleged
conspiracy between Cablevision and its affiliated MSG LP (which owns MSG
and FSNY sports networks) constitutes a "combination and arrangement"
sufficient to fall under the Donnelly Act.*fn20 While YES devotes much
of the Complaint to alleging that Cablevision is a vertically integrated
entity which utilizes its subsidiaries (i.e. CSC Holdings) and its
controlling interest in its affiliates as a single force to eject YES
from several related markets*fn21, here, Cablevision argues that they
are indeed separate entities: "[W]ith less than 47% ownership of MSG and
FSNY, [Cablevision] does not have sufficient ownership to fall either
under Copperweld or outside the scope of New York's Donnelly Act." Pl.'s
Mem. Law at 30. YES cannot have it both ways.*fn22 Indeed, the
Copperweld inquiry is more substantively about determining whether there
existed control and a so-called "unity of purpose" rather than the
establishment of any magic number percentage of ownership. See generally
Copperweld at 767-778.
More importantly, conclusory allegations of conspiracy are legally
insufficient to make out a violation of the Donnelly Act. Sands v.
Ticketmaster-New York, Inc., 207 A.D.2d 687, 616 N.Y.S.2d 362, 364 (1st
Dep't 1994) Plaintiff alleges no facts to suggest that Cablevision's
refusal to carry YES on reasonable, nondiscriminatory terms (Compl.
¶ 167-168) or "control" of the Knicks and Rangers (Compl. ¶¶ 8,
48, 162), was the product of a conspiracy or reciprocal arrangement, as
opposed to a unilateral act by Cablevision that may have inured to the
benefit of FSNY and MSG. Great Atlantic & Pacific Tea Co., Inc.,
997 F. Supp. at 352 (finding plaintiff's conclusory allegation regarding
conspiracy insufficient to state a claim).
Plaintiffs relies on Anheuser-Busch, Inc. v. Abrams, 525 N.Y.S.2d 816,
819 (N.Y. 1988) for the proposition that "vertical restraints on trade if
demonstrated to be unreasonable" clearly fall under the Donnelly Act.
Pl.'s Mem. Law at 28. Anheuser-Busch, however, is a case involving
purportedly illegal agreements to eliminate intrabrand competition, made
between two separate economic entities, beer brewers and designated
wholesalers in a given territory, "not to sell the brewer's products
outside that territory or to anyone inside the territory who would resell
the products elsewhere." Id. at 818. As such, these agreements, which
operated to restrain trade vertically, clearly fell under the Donnelly
Act. Anheuser-Busch, however, has no application here where the
allegations relate to a network of subsidiaries and affiliates created by
one vertically integrated corporation. Further, reliance on People v.
Schwartz is also misplaced, where the state court did not need to decide
the issue of Copperweld's applicability "because the indictment charges
conspiracy with two people . . . and this second person has no
relationship with defendant or his corporation." People v. Schwartz,
Index No. 1557/86, 1986 WL 55321 (N.Y.Sup.Ct. Oct. 17, 1986).
Accordingly, Defendant's motion to dismiss the Donnelly Act claim
(Count VIII) is GRANTED.
For the reasons stated above, the Court denies Defendant's motion to
dismiss with the exception of Defendant's motion as to Count VIII, the
Donnelly Act claim, which is granted.
Plaintiff shall file an amended complaint in accordance with this
Opinion (see n. 12 supra) by September 24, 2002. Defendant shall respond
by October 14, 2002.