Memorandum in Support of Motion to Amend Complaint - Download as DOC

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					 1   ALIOTO LAW FIRM
     Joseph M. Alioto
 2   Angelina Alioto-Grace, Pro Hac Vice
     One Embarcadero Center, 39th Floor
 3   San Francisco, CA 94111-3607
     Telephone: 415-434-8900
 4   Facsimile: 415-434-9200

 5   SHULMAN, WALCOTT & SHULMAN, P.A.
     Daniel R. Shulman, Pro Hac Vice
 6   Jim Hilbert, Pro Hac Vice
     121 West Franklin Avenue
 7   Minneapolis, MN 55404
     Telephone: 612-871-2909
 8   Facsimile: 612-871-2939

 9   Attorneys for Plaintiff Clinton Reilly STATES DISTRICT COURT
                                   UNITED

10                                      NORTHERN DISTRICT OF CALIFORNIA

11
     CLINTON REILLY,                                                       COURT FILE NO. C 00 0119 VRW
12

13                                            Plaintiff,
                                                                       PLAINTIFF'S MEMORANDUM IN
14   v.                                                                SUPPORT OF REQUESTED
                                                                       CONCLUSIONS OF LAW
15
     THE HEARST CORPORATION and THE
16   CHRONICLE PUBLISHING COMPANY,
                                                                       Hearing Date: Wednesday, May 31, 2000
17                                            Defendants,              Hearing Time: 9:30 a.m.
18
     and                                                               Honorable Vaughn R. Walker

19   EXIN, LLC,
20
                                              Intervenor.
21

22

23

24

25

26

27

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29   COURT FILE NO: C 00 0119 VRW                                                  PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                          REQUESTED CONCLUSIONS OF LAW
30

31
 1                                                       TABLE OF CONTENTS

 2                                                                                                                                   Page

 3   Table of Authorities ...............................................................................................................ii

 4   REQUESTED CONCLUSION OF LAW #1 ........................................................................1

 5   REQUESTED CONCLUSION OF LAW #2 ........................................................................1

 6   REQUESTED CONCLUSION OF LAW #3 ........................................................................3

 7   REQUESTED CONCLUSION OF LAW #4 ........................................................................4

 8   REQUESTED CONCLUSION OF LAW #5 ........................................................................5

 9   REQUESTED CONCLUSION OF LAW #6 ........................................................................6

10   REQUESTED CONCLUSION OF LAW #7 ........................................................................8

11   REQUESTED CONCLUSION OF LAW #8 ........................................................................13

12   REQUESTED CONCLUSION OF LAW #9 ........................................................................14

13   REQUESTED CONCLUSION OF LAW #10 ......................................................................15

14   REQUESTED CONCLUSION OF LAW #11 ......................................................................16

15   REQUESTED CONCLUSION OF LAW #12 ......................................................................17

16   REQUESTED CONCLUSION OF LAW #13 ......................................................................17

17   REQUESTED CONCLUSION OF LAW #14 ......................................................................17

18   REQUESTED CONCLUSION OF LAW #15 ......................................................................21

19   REQUESTED CONCLUSION OF LAW #16 ......................................................................23

20   REQUESTED CONCLUSION OF LAW #17 ......................................................................23

21   REQUESTED CONCLUSION OF LAW #18 ......................................................................25

22   REQUESTED CONCLUSION OF LAW #19 ......................................................................25

23

24

25

26

27

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29   COURT FILE NO: C 00 0119 VRW                                                             PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                                     REQUESTED CONCLUSIONS OF LAW
30

31
 1                                                    TABLE OF AUTHORITIES

 2                                                                                                                                Page
                                                                     CASES
 3

 4   Advanced Health-Care Servs., Inc. v. Radford Community Hosp.,
     910 F.2d 139 (4th Cir. 1990) ..................................................................................................14
 5
     American Soc'y of Mechanical Eng'rs, Inc. v. Hydrolevel Corp.,
 6
     456 U.S. 556 (1982) ...............................................................................................................3
 7
     American Tobacco Co. v. United States,
 8   328 U.S. 781 (1946) ...............................................................................................................9, 14, 16
 9
     Apex Hosiery Co. v. Leader,
10   310 U.S. 469 (1940) ...............................................................................................................14
11
     Aspen Skiing Co. v. Aspen Highland Skiing Corp.,
12   472 U.S. 585 (1985) ...............................................................................................................10, 14

13   Associated Press v. United States,
     326 U.S. 1 (1945) ...................................................................................................................16, 24
14

15   Associated Radio Serv. Co. v. Page Airways, Inc.,
     624 F.2d 1342 (5th Cir. 1980), cert. denied,
16   450 U.S. 1030 (1981) .............................................................................................................6
17
     Blue Shield of Va. v. McCready,
18   457 U.S. 465 (1982) ...............................................................................................................2

19   Brown Shoe Co. v. United States,
20
     370 U.S. 294 (1962) ...............................................................................................................6, 8, 10-11

21   Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,
     429 U.S. 477 (1977) ...............................................................................................................3
22

23   California v. American Stores Co.,
     495 U.S. 271 (1990) ...............................................................................................................2, 3, 21
24
     Cargill, Inc. v. Monfort of Colo., Inc.,
25
     479 U.S. 104 (1986) ...............................................................................................................3
26
     CIA Petrolera Caribe, Inc. v. Arco Caribbean, Inc.,
27   754 F.2d 404 (1st Cir. 1985) ...................................................................................................4
28
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29   COURT FILE NO: C 00 0119 VRW                                                            PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                                    REQUESTED CONCLUSIONS OF LAW
30

31
     Citizen Publishing Co. v. United States,
 1
     394 U.S. 131 (1969) ...............................................................................................................18, 19, 20
 2
     City of Anaheim v. Southern Cal. Edison Co.,
 3   955 F.2d 1373 (9th Cir. 1992) ................................................................................................14
 4
     Community Publishers, Inc. v. Donrey Corp.,
 5   892 F. Supp. 1146 (W.D. Ark.),
     aff'd, 139 F.3d 1180 (8th Cir. 1998) .......................................................................................5, 8
 6

 7
     Continental Ore Co. v. Union Carbide & Carbon Corp.,
     370 U.S. 690 (1962) ...............................................................................................................16
 8
     Eastman Kodak Co. v. Southern Photo Materials Co.,
 9
     273 U.S. 359 (1927) ...............................................................................................................24
10
     F.T.C. v. Staples, Inc.,
11   970 F. Supp. 1066 (D.D.C. 1997) ..........................................................................................6
12
     F.T.C. v. Warner Communications, Inc.,
13   742 F.2d 1156 (9th Cir. 1984) ................................................................................................19

14   Fashion Originators' Guild of Am. v. F.T.C.,
     312 U.S. 457 (1941) ...............................................................................................................10
15

16   General Indus. Corp. v. Hartz Mountain Corp.,
     810 F.2d 795 (8th Cir. 1987) ..................................................................................................14
17

18
     Gilder v. PGA Tour, Inc.,
     936 F.2d 417 (9th Cir. 1991) ..................................................................................................4
19
     Hospital Corp. of Am. v. F.T.C.,
20
     807 F.2d 1381 (7th Cir. 1986, Posner, J.),
21   cert. denied, 481 U.S. 1038 (1987) ........................................................................................4

22   In re Nissan Motor Corp. Antitrust Litig.,
     430 F. Supp. 231 (S.D. Fla. 1977) .........................................................................................16
23

24   International Salt Co. v. United States,
     332 U.S. 392 (1947) ...............................................................................................................21, 23
25
     International Shoe Co. v. F.T.C.,
26
     280 U.S. 291 (1930) ...............................................................................................................17-18
27
     Klor's, Inc. v. Broadway-Hale Stores, Inc.,
28
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29   COURT FILE NO: C 00 0119 VRW                                                           PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                                   REQUESTED CONCLUSIONS OF LAW
30

31
     359 U.S. 207 (1959) ...............................................................................................................10
 1

 2   Lawlor v. National Screen Serv. Corp.,
     349 U.S. 322 (1955) ...............................................................................................................2
 3
     Lucas Automotive Eng'g, Inc. v. Bridgestone/Firestone, Inc.,
 4
     140 F.3d 1228 (9th Cir. 1998) ................................................................................................3
 5
     Maryland and Virginia Milk Producers Ass'n v. United States,
 6   362 U.S. 458 (1960) ...............................................................................................................16
 7
     Morgenstern v. Wilson,
 8   29 F.3d 1291 (8th Cir. 1994), cert. denied,
     513 U.S. 1150 (1995) .............................................................................................................6
 9

10   Movie 1 & 2 v. United Artists Communications, Inc.,
     909 F.2d 1245 (9th Cir. 1990), cert. denied,
11   501 U.S. 1230 (1991) .............................................................................................................15
12
     NCAA v. Board of Regents of Univ. of Okla.,
13   468 U.S. 85 (1984) .................................................................................................................10

14   National Soc'y of Professional Eng'rs v. United States,
     435 U.S. 679 (1978) ...............................................................................................................21
15

16   Nelson v. Monroe Regional Med. Cntr.,
     925 F.2d 1555 (7th Cir.), cert. denied,
17   502 U.S. 903 (1991) ...............................................................................................................1, 4
18
     Olin Corp. v. F.T.C.,
19   986 F.2d 1295 (9th Cir. 1993),
     cert. denied, 510 U.S. 1110 (1994) ........................................................................................19
20

21   Reiter v. Sonotone Corp.,
     442 U.S. 330 (1979) ...............................................................................................................1-2, 3
22
     Schine Chain Theatres, Inc. v. United States,
23
     334 U.S. 110 (1948) ...............................................................................................................24
24
     State of Hawaii v. Gannett Pac. Corp.,
25   Civil No. 99-687 ACK-BMK, 1999 U.S. Dist.
     Lexis 19069 (D. Haw., October 15, 1999),
26
     aff'd, November 15, 1999 (9th Cir., unreported) ....................................................................15
27
     Tasty Baking Co. v. Ralston Purina, Inc.,
28
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29   COURT FILE NO: C 00 0119 VRW                                                            PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                                    REQUESTED CONCLUSIONS OF LAW
30

31
     653 F. Supp. 1250 (E.D. Pa. 1987) ........................................................................................4
 1

 2   Thompson v. Metropolitan Multi-List, Inc.,
     934 F.2d 1566 (11th Cir. 1991),
 3   cert. denied, 506 U.S. 903 (1992) ..........................................................................................6
 4
     Times-Picayune Publishing Co. v. United States,
 5   345 U.S. 594 (1953) ...............................................................................................................7

 6   Transamerica Computer Co., Inc. v. International Business Machines,
 7
     698 F.2d 1377 (9th Cir.), cert. denied, 464 U.S. 955 (1983) ..................................................15

 8   United States v. Aluminum Co. of Am.,
     148 F.2d 416 (2d Cir. 1945, L. Hand, J.) ...............................................................................9, 14
 9

10   United States v. American Airlines, Inc.,
     743 F.2d 1114 (5th Cir. 1984),
11   cert. dismissed, 474 U.S. 1001 (1985) ...................................................................................15
12
     United States v. American Tobacco Co.,
13   221 U.S. 106 (1911) ...............................................................................................................24

14   United States v. Continental Can Co.,
     378 U.S. 441 (1964) ...............................................................................................................8
15

16   United States v. Crescent Amusement Co.,
     323 U.S. 173 (1944) ...............................................................................................................24
17

18
     United States v. El Paso Natural Gas Co.,
     376 U.S. 651 (1964) ...............................................................................................................3-4
19
     United States v. First Nat'l Bank & Trust Co. of Lexington,
20
     376 U.S. 665 (1964) ...............................................................................................................13-14
21
     United States v. Greater Buffalo Press, Inc.,
22   402 U.S. 549 (1971) ...............................................................................................................18
23
     United States v. Griffith,
24   334 U.S. 100 (1948) ...............................................................................................................9

25   United States v. Grinnell Corp.,
     384 U.S. 563 (1966) ...............................................................................................................23
26

27

28
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29   COURT FILE NO: C 00 0119 VRW                                                            PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                                    REQUESTED CONCLUSIONS OF LAW
30

31
     United States v. Jos. Schlitz Brewing Co.,
 1
     253 F. Supp. 129 (N.D. Cal. 1966),
 2   aff'd, 385 U.S. 37 (1966)........................................................................................................8, 19

 3   United States v. M.P.M., Inc.,
     397 F. Supp. 78 (D. Colo. 1975) ............................................................................................19
 4

 5   United States v. Pabst Brewing Co.,
     384 U.S. 546 (1966) ...............................................................................................................8, 11-12
 6

 7
     United States v. Paramount Pictures, Inc.,
     334 U.S. 131 (1948) ...............................................................................................................16, 23, 24
 8
     United States v. Philadelphia Nat'l Bank,
 9
     374 U.S. 321 (1963) ...............................................................................................................4, 6, 8, 11
10
     United States v. Phillips Petroleum Co.,
11   367 F. Supp. 1226 (C.D. Cal. 1973),
     aff'd, 418 U.S. 906 (1974)......................................................................................................19
12

13   United States v. Third Nat'l Bank in Nashville,
     390 U.S. 171 (1968) ...............................................................................................................18
14
     United States v. Times Mirror Co.,
15
     274 F. Supp. 606 (C.D. Cal. 1967),
16   aff'd, 390 U.S. 712 (1968)......................................................................................................5, 6, 8

17   United States v. Trans-Missouri Freight Ass'n,
18
     166 U.S. 290 (1897) ...............................................................................................................10

19   United States v. Vons Grocery Co.,
     384 U.S. 270 (1966) ...............................................................................................................8, 11
20

21   Virginia Vermiculite, Ltd. v. W.R. Grace & Co.,
     156 F.3d 535 (4th Cir. 1998), cert. denied,
22   119 S. Ct. 1458 (1999) ...........................................................................................................16
23
     Volvo No. Am. Corp. v. Men's Int'l Professional Tennis Council,
24   857 F.2d 55 (2d Cir. 1988).....................................................................................................14

25   William Inglis & Sons Baking Co. v. ITT Continental Baking Co., Inc.,
     668 F.2d 1014 (9th Cir. 1981), cert. denied, 459 U.S. 825 (1982) .........................................14
26

27

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29   COURT FILE NO: C 00 0119 VRW                                                           PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                                   REQUESTED CONCLUSIONS OF LAW
30

31
     Zenith Radio Corp. v. Hazeltine Research, Inc.,
 1
     395 U.S. 100 (1969) ...............................................................................................................2, 4, 21
 2

 3                                                      RULES AND STATUTES
 4
     28 U.S.C. § 1331 ...................................................................................................................1
 5
     28 U.S.C. § 1337 ....................................................................................................................1
 6

 7
     Clayton Antitrust Act, Section 4, 15 U.S.C. § 15 ..................................................................1, 25

 8   Clayton Antitrust Act, Section 7, 15 U.S.C. § 18 ..................................................................Passim
 9
     Clayton Antitrust Act, Section 16, 15 U.S.C. § 26 ................................................................1, 3, 4,
10                                                                                                                      21, 25

11   Newspaper Preservation Act, 15 U.S.C. § 1801, et seq. ........................................................12, 13, 23,
                                                                                                                           24
12

13   Sherman Antitrust Act, Section 1, 15 U.S.C. § 1...................................................................13, 14, 16,
                                                                                                                        17, 21, 23
14
     Sherman Antitrust Act, Section 2, 15 U.S.C. § 2...................................................................14, 15, 17,
15
                                                                                                                            21, 23
16

17

18

19

20

21

22

23

24

25

26

27

28
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29   COURT FILE NO: C 00 0119 VRW                                                             PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                                     REQUESTED CONCLUSIONS OF LAW
30

31
 1             Plaintiff above-named submits this memorandum in support of Plaintiff's Requested

 2   Conclusions of Law in the above-entitled action. Hereafter, plaintiff will set forth the specific

 3   Conclusions of Law requested by plaintiff and the underlying legal authority that supports each

 4   requested conclusion.

 5
     REQUESTED CONCLUSION OF LAW #1: THIS COURT HAS SUBJECT MATTER
 6
     JURISDICTION OF THIS ACTION UNDER 28 U.S.C. §§ 1331 AND 1337 AND
 7   SECTIONS 4 AND 16 OF THE CLAYTON ANTITRUST ACT, 15 U.S.C. §§ 15, 26.

 8
               Jurisdiction is not questioned here. Title 28, section 1331 provides for federal question

 9
     jurisdiction; and section 1337 and sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26,

10
     provide for federal jurisdiction for suits under the antitrust laws.

11
     REQUESTED CONCLUSION OF LAW #2: AS A CONSUMER, I.E., A SUBSCRIBER
12   TO THE SAN FRANCISCO CHRONICLE AND A PURCHASER OF THE SAN
     FRANCISCO EXAMINER, PLAINTIFF HAS STANDING TO OBTAIN AN INJUNCTION
13
     TO PREVENT DEFENDANT THE HEARST CORPORATION ("HEARST") FROM
14   PURCHASING THE CHRONICLE FROM DEFENDANT THE CHRONICLE
     PUBLISHING COMPANY ("CPC"), AND TO PREVENT HEARST FROM
15   TRANSFERRING THE EXAMINER TO DEFENDANT-INTERVENOR EXIN, LLC
16
     ("THE FANGS").
               Plaintiff is a consumer: a subscriber to The Chronicle and a purchaser of The Examiner.
17
     Plaintiff therefore has standing under the antitrust laws to challenge Hearst's acquisition of The
18
     Chronicle. This acquisition will result in a reduction of output (only one daily newspaper in San
19
     Francisco); a lessening of consumer choice (only one news and editorial voice); the elimination of
20
     competition within the Joint Operating Agreement ("JOA"), insofar as Hearst and CPC try to
21
     position themselves advantageously in anticipation of either ending or renegotiating the JOA;
22
     increased subscription and newsstand prices if The Chronicle becomes the only daily newspaper in
23
     San Francisco; and the elimination of competition that would have occurred on the expiration of
24
     the JOA. The law has recognized the ability of consumers, or their authorized representatives, to
25
     sue to redress such injuries. Nelson v. Monroe Regional Med. Cntr., 925 F.2d 1555, 1562-65, 1568
26
     (7th Cir. 1991) (consumers accorded standing under section 7 of the Clayton Act to challenge a
27
     hospital merger); see Reiter v. Sonotone Corp., 442 U.S. 330 (1979) (consumers have standing to
28
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29   COURT FILE NO: C 00 0119 VRW                                          PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                  REQUESTED CONCLUSIONS OF LAW
30

31
 1   enforce the antitrust laws when violations cause them monetary injury); California v. American

 2   Stores Co., 495 U.S. 271 (1990) (action by state as parens patriae to redress harm to its citizens as

 3   consumers resulting from a merger); see also Blue Shield of Va. v. McCready, 457 U.S. 465,

 4   473-74 (1982) (injury to the "general economy" of a state "is no more than a reflection of injuries to

 5   the 'business or property' of consumers, for which they may recover themselves . . . .").

 6             Plaintiff's standing as a consumer is evident when one considers that standing would not be

 7   an issue were this action brought by the State of California as parens patriae on behalf of

 8   consumers, or were this a class action brought by plaintiff on behalf of subscribers and purchasers

 9   of the two newspapers. In either type of action, the defendants must concede standing. Yet, in

10   each instance, the rights being asserted, which confer standing to bring the action, are merely an

11   aggregation of the individual rights that plaintiff is asserting here: the rights of a consumer to be

12   free of monopolistic overcharges, limitations of output, and narrowing of choice. Thus, if the State

13   of California could bring a parens patriae action, or if plaintiff could bring a class action to

14   vindicate such rights, plaintiff can bring this lawsuit to assert these same rights on his own behalf.

15             Congress has provided for persons such as plaintiff to enforce the antitrust laws as private

16   attorneys general. The Supreme Court has specifically noted that "the purpose of giving private

17   parties treble-damage and injunctive remedies was not merely to provide private relief, but was to

18   serve as well the high purpose of enforcing the antitrust laws." Zenith Radio Corp. v. Hazeltine

19   Research, Inc., 395 U.S. 100, 130-31 (1969); Lawlor v. National Screen Serv. Corp., 349 U.S. 322,

20   329 (1955):

21
                         There is no merit, therefore, in the respondents' contention that
22
                         petitioners are precluded by their failure in the 1942 suit to press
23                       their demand for injunctive relief. Particularly is this so in view of
                         the public interest in vigilant enforcement of the antitrust laws
24                       through the instrumentality of the private treble-damage action.
25

26   American Soc'y of Mechanical Eng'rs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 572-73, n.10
27   (1982); Reiter v. Sonotone Corp., 442 U.S. at 344 ("Congress created the treble-damages remedy .
28
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29   COURT FILE NO: C 00 0119 VRW                                          PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                  REQUESTED CONCLUSIONS OF LAW
30

31
 1   . . precisely for the purpose of encouraging private challenges to antitrust violations. These private

 2   suits provide a significant supplement to the limited resources available to the Department of

 3   Justice for enforcing the antitrust laws and deterring violations."                (Emphasis in original));

 4   California v. American Stores Co., 495 U.S. 271, 284 (1990). The Supreme Court's admonitions

 5   are particularly appropriate here, where plaintiff is acting as a private attorney general by default, in

 6   place of federal, state, and local authorities whose absence is both conspicuous and suspect.

 7
     REQUESTED CONCLUSION OF LAW #3: THE INJURY OF WHICH PLAINTIFF
 8
     COMPLAINS FROM THE TRANSACTIONS GIVING RISE TO THIS LAWSUIT
 9   CONSTITUTES ANTITRUST INJURY, I.E., INJURY OF THE TYPE THE ANTITRUST
     LAWS WERE DESIGNED TO PREVENT ARISING FROM THAT WHICH MAKES
10   DEFENDANTS' CONDUCT UNLAWFUL.
11             The injury of which plaintiff complains is an antitrust injury, i.e., injury of the type the
12   antitrust laws were intended to prevent and that flows from that which makes defendants' acts
13   unlawful. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). Antitrust
14   injury is required in private actions challenging a merger under section 16 of the Clayton Act.
15   Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104 (1986). In Cargill, the plaintiff lacked
16   antitrust injury because it was complaining of a decrease in prices and an increase in competition.
17   Here, however, plaintiff's claim is exactly the opposite. Plaintiff is complaining, and the evidence
18   shows, that if Hearst acquires The Chronicle, there will be less competition, and Hearst will raise
19   prices—the hallmarks of monopoly. These are exactly the evils against which section 7 is directed,
20   and which render a merger unlawful. Lucas Automotive Eng'g, Inc. v. Bridgestone/Firestone, Inc.,
21   140 F.3d 1228, 1236-37 (9th Cir. 1998) (finding ". . . a customer in a market controlled by a
22   monopolist, has standing to assert a s§ 7 claim for equitable relief, including divestiture, under
23   § 16."); United States v. El Paso Natural Gas Co., 376 U.S. 651, 659 (1964) ("We repeat that one
24   purpose of § 7 was 'to arrest the trend toward concentration, the tendency to monopoly, before the
25   consumers' alternatives disappeared through merger. . . .'", quoting United States v. Philadelphia
26   Nat'l Bank, 374 U.S. 321, 367 (1963), emphasis in original); Hospital Corp. of Am. v. F.T.C., 807
27   F.2d 1381, 1389 (7th Cir. 1986, Posner, J.) ("Section 7 does not require proof that a merger or other
28
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29   COURT FILE NO: C 00 0119 VRW                                          PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                  REQUESTED CONCLUSIONS OF LAW
30

31
 1   acquisition has caused higher prices in the affected market. All that is necessary is that the merger

 2   create an appreciable danger of such consequences in the future."); Nelson v. Monroe Regional

 3   Med. Cntr., 925 F.2d at 1564 ("As defendant concedes 'antitrust injury "means injury from higher

 4   prices or lower output, the principle vices proscribed by the antitrust laws."'") Because plaintiff is

 5   complaining of just such a potential injury resulting from Hearst's acquisition of The Chronicle,

 6   plaintiff has sustained antitrust injury.

 7
     REQUESTED CONCLUSION OF LAW #4:      PLAINTIFF IS ENTITLED TO
 8
     INJUNCTIVE RELIEF BECAUSE HE HAS DEMONSTRATED A SIGNIFICANT
 9   THREAT OF INJURY FROM AN IMPENDING VIOLATION OF THE ANTITRUST
     LAWS.
10
               Under section 16 of the Clayton Act, as construed by the Supreme Court, injunctive relief is
11
     available "upon the demonstration of 'threatened' injury.               That remedy is characteristically
12
     available even though the plaintiff has not yet suffered actual injury . . . [citation omitted]; he need
13
     only demonstrate a significant threat of injury from an impending violation of the antitrust laws or
14
     from a contemporary violation likely to continue or recur." Zenith Radio Corp. v. Hazeltine
15
     Research, Inc., 395 U.S. at 130; Tasty Baking Co. v. Ralston Purina, Inc., 653 F. Supp. 1250, 1274
16
     (E.D. Pa. 1987) ("This requirement is satisfied where defendants manifest an intent to violate the
17
     antitrust laws, as here, by evidence that the identified anticompetitive actions are feasible and
18
     would significantly benefit defendants."); CIA Petrolera Caribe, Inc. v. Arco Caribbean, Inc., 754
19
     F.2d 404, 407-08 (1st Cir. 1985); see Gilder v. PGA Tour, Inc., 936 F.2d 417, 423 (9th Cir. 1991).
20
     Here, plaintiff has shown a significant threat of injury from Hearst's increasing subscription and
21
     newsstand prices after it acquires The Chronicle. Accordingly, plaintiff is entitled to injunctive
22
     relief under section 16 of the Clayton Act.
23

24   REQUESTED CONCLUSION OF LAW #5: THE RELEVANT PRODUCT MARKET
     FOR PURPOSES OF THIS ACTION IS THE PUBLICATION AND SALE OF PAID
25
     CIRCULATION DAILY NEWSPAPERS.
26
               The record in this case confirms what courts have invariably held whenever the issue has
27
     been litigated: local daily newspapers are a relevant market for antitrust purposes. United States v.
28
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29   COURT FILE NO: C 00 0119 VRW                                          PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                  REQUESTED CONCLUSIONS OF LAW
30

31
 1   Times Mirror Co., 274 F. Supp. 606, 617 (C.D. Cal. 1967), aff'd, 390 U.S. 712 (1968):

 2
                                  The daily newspaper business is a distinct line of commerce
 3
                         and is a product separate and distinct from any other product. It has
 4                       sufficient peculiar characteristics and uses which make it
                         distinguishable from all other products. . . . [Citation omitted.] A
 5                       daily newspaper is a newspaper of general readership published at
                         least five times a week. Daily newspapers have a unique market for
 6
                         which there is no real substitute. They have achieved industry and
 7                       public recognition and utilize unique methods of production,
                         distribution and pricing, all practical indicia for determining a
 8                       product market.
 9
                                 The daily newspaper provides a cluster of services in one
10                       unique package. It provides readers with a daily written record of
                         current events and reference information including vital statistics,
11
                         public announcements, legal notices, box scores, stock market
12                       reports, weather reports, theater listings and radio and television
                         logs. They provide more, wider and deeper coverage of all news -
13                       international, national and local - than any other medium of daily
                         news dissemination. They offer a combination of syndicated
14
                         features, such as comics, columnists and cartoons, not carried by any
15                       other medium. They provide readers with current advertising in
                         greater depth and detail than any other medium. There are some
16                       classes of advertisers, such as grocery and department stores, which
                         must rely upon daily newspapers for almost all their advertising.
17

18
     The foregoing words, written over 30 years ago, apply with equal force today. As noted by the
19
     court in Community Publishers, Inc. v. Donrey Corp., 892 F. Supp. 1146, 1157 (W.D. Ark.), aff'd,
20
     139 F.3d 1180 (8th Cir. 1998), after finding daily newspapers to be a relevant market in language
21
     strikingly similar to that in Times Mirror, "in the future, it would probably make little sense for any
22
     party to relitigate this issue, given the amount of resources spent on an issue that has been resolved
23
     the same way by every court that has addressed it in any depth." (See cases cited at 892 F. Supp.
24
     1156-57.) The record in this case is no different.
25

26   REQUESTED CONCLUSION OF LAW #6:       THE RELEVANT GEOGRAPHIC
     MARKET FOR PURPOSES OF THIS ACTION IS THE CITY AND COUNTY OF SAN
27   FRANCISCO, OR ALTERNATIVELY THE GREATER SAN FRANCISCO
28
     METROPOLITAN AREA.
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29   COURT FILE NO: C 00 0119 VRW                                          PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                  REQUESTED CONCLUSIONS OF LAW
30

31
 1             The relevant geographic market "is that geographic area 'to which consumers can

 2   practically turn for alternative sources of the product and in which the antitrust defendant faces

 3   competition.'"        F.T.C. v. Staples, Inc., 970 F. Supp. 1066, 1073 (D.D.C. 1997), quoting

 4   Morgenstern v. Wilson, 29 F.3d 1291, 1296 (8th Cir. 1994). In determining relevant market, "[t]he

 5   goal is to determine how economic factors function in terms of where buyers seek supplies and

 6   sellers seek purchasers." Thompson v. Metropolitan Multi-List, Inc., 934 F.2d 1566, 1573 (11th

 7   Cir. 1991). The "area of effective competition in the known line of commerce must be charted by

 8   careful selection of the market area in which the seller operates, and to which the purchaser can

 9   practicably turn for supplies." United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 359 (1963)

10   (emphasis in original). In Brown Shoe Co. v. United States, 370 U.S. 294, 336-37 (1962), the

11   Court provided the following guidelines, in which it noted that a single city could constitute a

12   relevant geographic market under section 7 of the Clayton Act:

13
                         Moreover, just as a product submarket may have § 7 significance as
14
                         the proper "line of commerce," so may a geographic submarket be
15                       considered the appropriate "section of the country." [Citation
                         omitted.] . . . Thus, although the geographic market in some
16                       instances may encompass the entire Nation, under other
                         circumstances it may be as small as a single metropolitan area.
17
     At bottom, determination of relevant market is a question of fact. Associated Radio Serv. Co. v.
18
     Page Airways, Inc., 624 F.2d 1342, 1348-49 (5th Cir. 1980).
19
               On this record, substantial evidence exists to compel the conclusion that the city and county
20
     of San Francisco is a relevant geographic market, or at least a relevant geographic submarket. The
21
     two classes of customers with which newspapers deal are readers and advertisers. Times-Picayune
22
     Publishing Co. v. United States, 345 U.S. 594, 610 (1953). The record here is that when readers in
23
     San Francisco turn to daily newspapers, they turn to newspapers published in San Francisco. The
24
     Chronicle and The Examiner have over 97 percent of paid circulation of daily newspapers in San
25
     Francisco. Similarly, when advertisers wish to reach readers in San Francisco, they use The
26
     Chronicle and The Examiner, with the lowest advertising rates per thousand. The evidence is
27
     overwhelming and undisputed that the newspaper business is local, in that newspapers have core
28
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29   COURT FILE NO: C 00 0119 VRW                                          PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                  REQUESTED CONCLUSIONS OF LAW
30

31
 1   markets consisting of the cities in which they are published and located. Although newspapers

 2   may seek readership and advertisers in localities outside their core markets, they do not

 3   significantly penetrate and erode the advertising or readership base in the core markets of other

 4   newspapers. The result is that advertisers face rates that differ from paper to paper across different

 5   communities, with the lowest rates per thousand readers being invariably in the newspaper

 6   published in the local community—compelling evidence of separate, local geographic markets.

 7             For purposes of the issues involved in this case, however, the result will be the same even if

 8   this Court finds the relevant geographic market to be broader, whether the five-county San

 9   Francisco metropolitan area, or the larger 11-county area. In these wider areas, The Chronicle and

10   The Examiner are still the dominant firms. In the five-county metropolitan area, their combined

11   share is 47 percent, more than five times the size of their nearest competitor, The Contra Costa

12   Times. In the 11-county area, their combined share is 34 percent, double the share of their next

13   largest competitor, The San Jose Mercury News. Significantly, however, no competitor in either

14   the five-county or 11-county area is able to achieve more than 20 percent of its circulation outside

15   of its home market. (Plaintiff Exhibit ("PX") 3, Bates No. H-0001739.) Thus, although The San

16   Jose Mercury News may provide effective competition for The Chronicle and The Examiner in

17   Santa Clara County, its home county where it has 80 percent of its circulation, it does so nowhere

18   else. The same is true for all other newspapers throughout the Greater Bay Area. Hence, if the

19   Court concludes that the relevant geographic market is the broader metropolitan area, The

20   Chronicle and The Examiner are still the only two competitors able to achieve meaningful

21   circulation throughout any area beyond the core markets in which they are published. If the market

22   is metropolitan daily newspapers, there are still only two effective competitors, The Chronicle and

23   The Examiner. Thus, their combination, or the discontinuance of The Examiner, will result in a

24   monopoly and significant restraint of trade.

25
     REQUESTED CONCLUSION OF LAW #7: HEARST'S ACQUISITION OF THE
26
     CHRONICLE MAY SUBSTANTIALLY LESSEN COMPETITION OR TEND TO
27   CREATE A MONOPOLY IN THE RELEVANT MARKET, AND THEREBY VIOLATES
     SECTION 7 OF THE CLAYTON ANTITRUST ACT, 15 U.S.C. § 18.
28
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29   COURT FILE NO: C 00 0119 VRW                                          PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                  REQUESTED CONCLUSIONS OF LAW
30

31
 1             Section 7 of the Clayton Act proscribes any merger or acquisition "the effect of which may

 2   be substantially to lessen competition, or to tend to create a monopoly." 15 U.S.C. § 18. In this

 3   case, there are now two daily newspapers in San Francisco, or in the larger metropolitan area,

 4   depending on how the geographic market is defined. If Hearst acquires The Chronicle, there will

 5   be one. This acquisition occurs in an industry with a marked historical trend of increasing

 6   concentration and diminished competition. The market is also characterized by high barriers to

 7   entry and the absence of new entrants. Under the case law, a violation of section 7 clearly exists.

 8   United States v. Times Mirror, id.; Community Publishers, Inc. v. Donrey Corp., id.; Brown Shoe

 9   v. United States, id.; United States v. Jos. Schlitz Brewing Co., 253 F. Supp. 129 (N.D. Cal. 1966),

10   aff'd, 385 U.S. 37 (1966); United States v. Philadelphia Nat'l Bank, 374 U.S. 321 (1963); United

11   States v. Continental Can Co., 378 U.S. 441, 461-62 (1964):

12
                         The case falls squarely within the principle that where there has been
13
                         a "history of tendency toward concentration in the industry"
14                       tendencies toward further concentration "are to be curbed in their
                         incipiency." Brown Shoe Co. v. United States, 370 U.S. at 345, 346,
15                       8 L.Ed.2d at 548. Where "concentration is already great, the
                         importance of preventing even slight increases in concentration and
16
                         so preserving the possibility of eventual deconcentration is
17                       correspondingly great."

18   United States v. Vons Grocery Co., 384 U.S. 270 (1966); United States v. Pabst Brewing Co., 384

19   U.S. 546 (1966). Unless Hearst can present some defense or justification for The Chronicle

20   acquisition, the Court must find a violation of section 7.

21             In its defense, Hearst raises four points. The first of these, that the relevant market is

22   broader than plaintiff claims, has been dealt with supra. The second, that The Examiner is a failing

23   company, will be dealt with infra. The third is that Hearst has preserved competition by

24   transferring The Examiner to the Fangs. This claim, however, fails on the facts. The evidence

25   overwhelmingly shows that The Examiner in the Fangs' hands cannot be a competitive daily

26   newspaper or even a colorable substitute for the present paper. The transaction with the Fangs is a

27   sham, a political accommodation by Hearst, which will not preserve competition.

28             The final argument raised by Hearst is that its acquisition of The Chronicle will not
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29   COURT FILE NO: C 00 0119 VRW                                          PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                  REQUESTED CONCLUSIONS OF LAW
30

31
 1   further diminish competition, because the JOA between Hearst and CPC has already eliminated

 2   economic competition between the two newspapers, and antitrust law cannot properly concern

 3   itself with the policy of preserving two independent editorial voices, which is the concern of the

 4   Newspaper Preservation Act. This argument founders on both the facts and the law.

 5             On the facts, as the Justice Department argued in its Amicus Brief in the Honolulu case, the

 6   JOA has not eliminated all economic competition between Hearst and CPC. The JOA itself

 7   reserves to Hearst and CPC the right and obligation to set their own ad rates and subscription and

 8   newsstand prices. In addition, with the end of the JOA approaching in 2005, Hearst and CPC have

 9   both tried to position themselves advantageously either to be able to compete at the end of the JOA,

10   or to force the other party into a beneficial renegotiation or resolution of the JOA. Hence, the JOA

11   has not in fact eliminated all economic competition between Hearst and CPC.

12             Moreover, there is undeniably the potential of future competition at the conclusion of the

13   JOA in 2005. Allowing Hearst to acquire The Chronicle will eliminate that future competition.

14   The antitrust laws are as much concerned with the elimination of potential competition as they are

15   with actual competition. United States v. Aluminum Co. of Am., 148 F.2d 416, 431 (2d Cir. 1945,

16   L. Hand, J.); American Tobacco Co. v. United States, 328 U.S. 781, 797 (1946); United States v.

17   Griffith, 334 U.S. 100, 107 (1948) ("The anti-trust laws are as much violated by the prevention of

18   competition as by its destruction.")                   Thus, an acquisition that eliminates potential future

19   competition violates section 7 as much as one that eliminates present competition.

20             Even assuming the elimination of present economic, i.e., price, competition, however,

21   Hearst's acquisition of The Chronicle will result in one firm and one editorial voice where

22   previously there were two firms and two independent editorial voices. Plaintiff submits that this

23   reduction in the number of firms is cognizable under the antitrust laws, particularly section 7 of the

24   Clayton Act, even without regard to the policy of the Newspaper Preservation Act.

25             While recent decisions have treated antitrust in terms of allocative efficiency and effects on

26   price, there is another long line of cases, stretching from the early days of the antitrust laws through

27   the present in which the Supreme Court has condemned practices reducing the number of firms in

28
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29   COURT FILE NO: C 00 0119 VRW                                             PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                     REQUESTED CONCLUSIONS OF LAW
30

31
 1   a market. United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 323 (1897):

 2
                        Trade or commerce under those circumstances may nevertheless be
 3
                        badly and unfortunately restrained by driving out of business the
 4                      small dealers and worthy men whose lives have been spent therein,
                        and who might be unable to readjust themselves to their altered
 5                      surroundings. Mere reduction in the price of the commodity dealt in
                        might be dearly paid for by the ruin of such a class and the
 6
                        absorption of control over one commodity by an all-powerful
 7                      combination of capital.

 8   Fashion Originators' Guild of Am. v. F.T.C., 312 U.S. 457, 465 (1941); Klor's, Inc. v.

 9   Broadway-Hale Stores, Inc., 359 U.S. 207, 213-14 (1959):

10
                        As such it is not to be tolerated merely because the victim is just one
11                      merchant whose business is so small that his destruction makes little
12
                        difference to the economy. Monopoly can as surely thrive by the
                        elimination of such small businessmen, one at a time, as it can by
13                      driving them out in large groups. In recognition of this fact the
                        Sherman Act has consistently been read to forbid all contracts and
14
                        combinations "which 'tend to create a monopoly,'" whether "the
15                      tendency is a creeping one" or "one that proceeds at full gallop."
     NCAA v. Board of Regents of Univ. of Okla., 468 U.S. 85 (1984); Aspen Skiing Co. v. Aspen
16
     Highland Skiing Corp., 472 U.S. 585 (1985).
17
              Moreover, the intent of the antitrust laws to preserve competitors, as a means of preserving
18
     competition, is especially apparent under section 7 of the Clayton Act and the Supreme Court
19
     decisions applying it. Brown Shoe v. United States, 370 U.S. at 315 ("The dominant theme
20
     pervading congressional consideration of the 1950 amendments was a fear of what was considered
21
     to be a rising tide of economic concentration in the American economy."), 315-16 ("Other
22
     considerations cited in support of the bill were the desirability of retaining 'local control' over
23
     industry and the protection of small businesses."), 333, 344:
24

25
                        Of course, some of the results of large integrated or chain operations
26                      are beneficial to consumers. Their expansion is not rendered
                        unlawful by the mere fact that small independent stores may be
27
                        adversely affected. It is competition, not competitors, which the Act
28                      protects. But we cannot fail to recognize Congress' desire to
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
                        promote competition through the protection of viable, small, locally
 1
                        owned businesses. Congress appreciated that occasional higher
 2                      costs and prices might result from the maintenance of fragmented
                        industries and markets. It resolved these competing considerations
 3                      in favor of decentralization. We must give effect to that decision.
 4   United States v. Von's Grocery Co., 384 U.S. at 274-75, n.7 (quoting with approval Judge Learned
 5   Hand, "Throughout the history of these statutes it has been constantly assumed that one of their
 6   purposes was to perpetuate and preserve, for its own sake and in spite of possible cost, an
 7   organization of industry in small units which can effectively compete with each other."), 275 n.10,
 8   277:
 9
                        By using these terms in § 7 which look not merely to the actual
10
                        present effect of a merger but instead to its effect upon future
11                      competition, Congress sought to preserve competition among many
                        small businesses by arresting a trend toward concentration in its
12                      incipiency before that trend developed to the point that a market was
13
                        left in the grip of a few big companies.
     278 ("It is enough for us that Congress feared that a market marked at the same time by both a
14
     continuous decline in the number of small businesses and a large number of mergers would slowly
15
     but inevitably gravitate from a market of many small competitors to one dominated by one or a few
16
     giants, and competition would thereby be destroyed."); United States v. Philadelphia Nat'l Bank,
17
     374 U.S. at 362-63; United States v. Pabst Brewing Co., 384 U.S. 546, 552-53 (1966):
18
                   Many believe that this assumption of Congress is wrong, and that
19                 the disappearance of small businesses with a correlative
                   concentration of business in the hands of a few is bound to occur
20
                   whether mergers are prohibited or not. But it is not for the courts to
21                 review the policy decision of Congress that mergers which may
                   substantially lessen competition are forbidden, which in effect the
22                 courts would be doing should they now require proof of the
                   congressional premise that mergers are a major cause of
23
                   concentration.
24            The foregoing authorities show that under section 7, a reduction in the number of
25   competitors, which will occur here, is a central and overriding concern of merger jurisprudence.
26   Thus, where the number of independent newspapers is reduced from two to one, section 7
27   proscribes the acquisition, regardless of whether and to what extent a JOA may have previously
28
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
 1   limited their economic competition.

 2            In addition to the policy of section 7, it is appropriate for the Court to consider "the public

 3   policy of the United States" as articulated in the Newspaper Preservation Act "to preserve the

 4   publication of newspapers in any city, community, or metropolitan area where a joint operating

 5   arrangement has been heretofore entered into . . . ." 15 U.S.C. § 1801. As a gloss on the antitrust

 6   laws, the Newspaper Preservation Act reaffirms for the newspaper industry the public policy

 7   underlying section 7, that preserving competitors is an appropriate means of preserving

 8   competition. Thus, when a merger eliminates two independent editorial voices, competition is

 9   reduced in the antitrust sense as Congress has defined competition not only under section 7, but

10   also under the Newspaper Preservation Act.

11            The position taken by Hearst in this litigation would frustrate the policy of both statutes. In

12   1965, because of "deficits" and in order to "enable both Chronicle and Hearst to survive as

13   publishers of separate and independent newspapers" (PX 1, pp. 1-2), Hearst and CPC entered into

14   the JOA. After the passage of the Newspaper Preservation Act in 1970, the JOA was allowed to

15   continue because, as of 1965, The Examiner was not "likely to remain or become a financially

16   sound publication." 15 U.S.C. § 1803(a). Under the Newspaper Preservation Act, Hearst and CPC

17   were granted antitrust immunity to fix prices and divide markets, "[p]rovided, [t]hat there is no

18   merger, combination, or amalgamation of editorial or reportorial staffs, and that editorial policies

19   be independently determined." 15 U.S.C. § 1802(2). For 35 years, Hearst and CPC have engaged

20   in per se violations of the antitrust laws, while both newspapers have become profitable and are

21   expected to continue to be profitable through the end of the JOA in 2005. Now Hearst comes

22   before this Court to suggest that because the JOA has allegedly eliminated competition between

23   Hearst and CPC, Hearst's purchase of The Chronicle will have no effects on competition, and

24   Hearst should be allowed to obtain a daily newspaper monopoly in San Francisco. This is a misuse

25   and perversion of both the Newspaper Preservation Act and the JOA. Having been allowed to

26   suppress competition under the JOA on condition that two independent newspapers be maintained,

27   Hearst now argues that because competition has already been suppressed, Hearst should be

28
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
 1   allowed to reduce the number of newspapers to one without fear of antitrust consequences.

 2   Clearly, Congress intended neither section 7 nor the Newspaper Preservation Act to be used in this

 3   manner for the elimination of both economic competition and independent newspaper voices.

 4   Hearst therefore cannot use the JOA or the Newspaper Preservation Act to justify its acquisition of

 5   The Chronicle.

 6
     REQUESTED CONCLUSION OF LAW #8: HEARST'S AGREEMENT WITH CPC TO
 7   ACQUIRE THE CHRONICLE IS AN AGREEMENT THAT UNREASONABLY
     RESTRAINS TRADE IN THE RELEVANT MARKET IN VIOLATION OF SECTION 1
 8   OF THE SHERMAN ANTITRUST ACT, 15 U.S.C. § 1.
 9            Because Hearst's agreement with CPC to acquire The Chronicle violates section 7 of the
10   Clayton Act, it also is an agreement that unreasonably restrains trade in violation of section 1 of the
11   Sherman Act. United States v. First Nat'l Bank & Trust Co. of Lexington, 376 U.S. 665 (1964). In
12   the Lexington Bank case, the Supreme Court reviewed a number of earlier decisions involving
13   railroad mergers and concluded:
14
                        The four railroad cases at least stand for the proposition that where
15                      merging companies are major competitive factors in a relevant
                        market, the elimination of significant competition between them, by
16                      merger or consolidation, itself constitutes a violation of § 1 of the
17
                        Sherman Act. That standard was met in the present case in view of
                        the fact that the two banks in question had such a large share of the
18                      relevant market.
19   376 U.S. at 671-72. So too, here, the only two firms in the daily newspaper business in San

20   Francisco have agreed to combine and eliminate both present and future competition. Their

21   agreement therefore violates section 1 of the Sherman Act.

22
     REQUESTED CONCLUSION OF LAW #9: HEARST'S AGREEMENT WITH CPC TO
23
     ACQUIRE THE CHRONICLE CONSTITUTES A CONSPIRACY TO MONOPOLIZE
24   THE RELEVANT MARKET IN VIOLATION OF SECTION 2 OF THE SHERMAN
     ANTITRUST ACT, 15 U.S.C. § 2.
25
              The elements of an unlawful conspiracy to monopolize are "concerted action, a specific
26
     intent to achieve an unlawful monopoly, and commission of an overt act in furtherance of the
27
     conspiracy." Advanced Health-Care Servs., Inc. v. Radford Community Hosp., 910 F.2d 139, 150
28
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
 1   (4th Cir. 1990); Volvo No. Am. Corp. v. Men's Int'l Professional Tennis Council, 857 F.2d 55, 74

 2   (2d Cir. 1988); American Tobacco Co. v. United States, 328 U.S. 781, 809 (1946). Here, the

 3   acquisition agreement between Hearst and CPC is concerted action. Overt acts include the steps

 4   taken by Hearst and CPC to consummate their transaction, including, for example, Hearst's

 5   agreement to transfer The Examiner to the Fangs. The element of specific intent "requires proof

 6   that the defendant intended his acts to produce monopoly power." General Indus. Corp. v. Hartz

 7   Mountain Corp., 810 F.2d 795, 801 (8th Cir. 1987). "Specific intent need not be proven by direct

 8   evidence, but can be inferred from the defendant's anticompetitive practices or other proof of

 9   unlawful conduct." 810 F.2d at 802; William Inglis & Sons Baking Co. v. ITT Continental Baking

10   Co., Inc., 668 F.2d 1014, 1027 (9th Cir. 1981). In finding specific intent, the actions of the

11   defendant "taken as a whole, can and should be considered." City of Anaheim v. Southern Cal.

12   Edison Co., 955 F.2d 1373, 1378 (9th Cir. 1992). In addition, a party must be presumed to attend

13   the natural consequences of its acts, Apex Hosiery Co. v. Leader, 310 U.S. 469, 485 (1940); and

14   "no monopolist monopolizes unconscious of what he is doing." United States v. Aluminum Co. of

15   Am., 148 F.2d at 432; Aspen Skiing Co. v. Aspen Highland Skiing Corp., 472 U.S. at 602-03, n.28.

16   Here, Hearst knows and intends that The Chronicle will be the only metropolitan daily newspaper

17   in San Francisco. Hearst has also entered into its sham transaction with the Fangs in order to create

18   the illusion of competition. This evidence is more than sufficient to establish specific intent to

19   monopolize. Accordingly, on this record, all elements of an unlawful conspiracy to monopolize

20   are present.

21
     REQUESTED CONCLUSION OF LAW #10: HEARST, BY CONTRACTING TO
22
     ACQUIRE THE CHRONICLE, HAS ATTEMPTED TO MONOPOLIZE THE
23   RELEVANT MARKET IN VIOLATION OF SECTION 2 OF THE SHERMAN ACT.

24
              The elements of an unlawful attempt to monopolize are (1) specific intent to control prices

25
     or destroy competition; (2) predatory or anticompetitive conduct to accomplish monopolization;

26
     (3) dangerous probability of success; and (4) causal antitrust injury. Movie 1 & 2 v. United Artists

27
     Communications, Inc., 909 F.2d 1245, 1254 (9th Cir. 1990), citing Transamerica Computer Co.,

28
     Inc. v. International Business Machines, 698 F.2d 1377 (9th Cir. 1983). Plaintiff has already
     d:\docstoc\working\pdf\b4979b6e-050c-49d9-ab50-09f93a22ad22.rtf 14
29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
 1   addressed specific intent and causal antitrust injury, supra. The predatory or anticompetitive

 2   conduct consists in Hearst's agreement to purchase The Chronicle and the steps it has taken to

 3   consummate that transaction, including, for example, the sham transaction with the Fangs.

 4   Dangerous probability of success appears from the evidence that once Hearst acquires The

 5   Chronicle, it will be the only metropolitan daily newspaper in San Francisco.

 6            In addition, solicitation of an agreement that will result in a monopoly constitutes an

 7   unlawful attempt to monopolize. United States v. American Airlines, Inc., 743 F.2d 1114 (5th Cir.

 8   1984). This has certainly occurred here, not only with the agreement to acquire The Chronicle, but

 9   also with the repeated prior proposals to form an arrangement under which Hearst would close The

10   Examiner while continuing to share in the profits of The Chronicle. See also State of Hawaii v.

11   Gannett Pac. Corp., Civil No. 99-687 ACK-BMK, 1999 U.S. Dist. Lexis 19069 (D. Haw., October

12   15, 1999), aff'd, November 15, 1999 (9th Cir., unreported). Hence, on this record, Hearst has

13   unlawfully attempted to monopolize the daily newspaper business in San Francisco.

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
     REQUESTED CONCLUSION OF LAW #11: THE AGREEMENT BETWEEN HEARST
 1
     AND THE FANGS TO TRANSFER THE EXAMINER TO THE FANGS CONSTITUTES A
 2   CONTRACT, COMBINATION, OR CONSPIRACY THAT UNREASONABLY
     RESTRAINS TRADE IN THE RELEVANT MARKET IN VIOLATION OF SECTION 1
 3   OF THE SHERMAN ACT.
 4            Part and parcel of Hearst's scheme to acquire The Chronicle has been Hearst's agreement to
 5   transfer The Examiner to the Fangs. To facilitate Hearst in its acquisition of The Chronicle, the
 6   Fangs have contracted with Hearst to obtain The Examiner if Hearst is able to buy The Chronicle.
 7   The Fangs have thereby joined and entered the a pre-existing unlawful combination between
 8   Hearst and CPC. As such, they are as culpable as if they had been parties to the original unlawful
 9   combination.        United States v. Paramount Pictures, Inc., 334 U.S. 131, 161 (1948) ("For
10   acquiescence in an illegal scheme is as much a violation of the Sherman Act as the creation and
11   promotion of one."); In re Nissan Motor Corp. Antitrust Litig., 430 F. Supp. 231, 233, and cases
12   cited therein (S.D. Fla. 1977); Virginia Vermiculite, Ltd. v. W.R. Grace & Co., 156 F.3d 535 (4th
13   Cir. 1998). Because the Hearst-CPC agreement is an unreasonable restraint of trade under section
14   1, the ancillary agreement between Hearst and the Fangs, formed to enable Hearst to complete its
15   agreement with CPC, likewise violates section 1. See United States v. Paramount Pictures, 334
16   U.S. at 152-53; Associated Press v. United States, 326 U.S. 1, 14 (1945) ("But however innocent
17   such agreements might be, standing alone, they would assume quite a different aspect if utilized as
18   essential features of a program to hamper or destroy competition."); American Tobacco Co. v.
19   United States, 328 U.S. at 809-10 ("Acts done to give effect to the conspiracy may be in themselves
20   wholly innocent acts. Yet, if they are part of the sum of the acts which are relied upon to effectuate
21   the conspiracy which the statute forbids, they come within its prohibition."); Maryland and
22   Virginia Milk Producers Ass'n v. United States, 362 U.S. 458, 471-72 (1960); Continental Ore Co.
23   v. Union Carbide & Carbon Corp., 370 U.S. 690, 707 (1962) (". . . it is well settled that acts which
24   are in themselves legal lose that character when they become constituent elements of an unlawful
25   scheme."). This is exactly the position in which the Fangs find themselves, and their agreement
26   with Hearst is therefore just as much a violation of section 1 as is Hearst's agreement with CPC.
27
     REQUESTED CONCLUSION OF LAW #12: THE AGREEMENT BETWEEN HEARST
28
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
     AND THE FANGS TO TRANSFER THE EXAMINER TO THE FANGS CONSTITUTES A
 1
     CONSPIRACY TO MONOPOLIZE THE RELEVANT MARKET IN VIOLATION OF
 2   SECTION 2 OF THE SHERMAN ACT.

 3
              For the same reasons that it constitutes a combination or a conspiracy in violation of section

 4
     1, Hearst's agreement with the Fangs constitutes an unlawful conspiracy to monopolize in violation

 5
     of section 2. Because Hearst's agreement with the Fangs is part and parcel of the overall conspiracy

 6
     to monopolize, it violates section 2 of the Sherman Act as well as section 1.

 7   REQUESTED CONCLUSION OF LAW #13: THE AGREEMENT BETWEEN HEARST
     AND THE FANGS TO TRANSFER THE EXAMINER TO THE FANGS CONSTITUTES
 8
     AN ATTEMPT BY HEARST TO MONOPOLIZE THE RELEVANT MARKET IN
 9   VIOLATION OF SECTION 2 OF THE SHERMAN ACT.

10            Hearst's agreement with the Fangs also constitutes an attempt by Hearst to monopolize the

11   daily newspaper market in San Francisco for the same reasons that Hearst's agreement with CPC

12   constitutes an attempt to monopolize. See discussion, supra.

13
     REQUESTED CONCLUSION OF LAW #14: HEARST HAS FAILED TO SUSTAIN ITS
14   BURDEN OF PROOF IN ESTABLISHING A FAILING COMPANY DEFENSE TO THE
15
     ANTITRUST VIOLATIONS WITH WHICH IT IS CHARGED AND WHICH IT HAS
     BEEN FOUND TO HAVE COMMITTED.
16
              As a matter of fact, and, more importantly, as a matter of law, Hearst cannot establish a
17
     failing company defense to any of the antitrust claims against it.
18
              First, as a matter of law, the failing company defense is not available to Hearst in this
19
     lawsuit. The failing company defense derives from International Shoe Co. v. F.T.C., 280 U.S. 291
20
     (1930). In that case, the Supreme Court approved an acquisition where the record disclosed the
21
     following facts:
22

23                      In the light of the case thus disclosed of a corporation with resources
                        so depleted and the prospect of rehabilitation so remote that it faced
24
                        the grave probability of a business failure with resulting loss to its
25                      stockholders and injury to the communities where its plants were
                        operated, we hold that the purchase of its capital stock by a
26                      competitor (there being no other prospective purchaser), not with a
                        purpose to lessen competition, but to facilitate the accumulated
27
                        business of the purchaser and with the effect of mitigating seriously
28                      injurious consequences otherwise probable, is not in contemplation
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
                        of law prejudicial to the public and does not substantially lessen
 1
                        competition or restrain commerce within the intent of the Clayton
 2                      Act.

 3
     280 U.S. at 302-03. In subsequent decisions, the Supreme Court has reaffirmed the defense,

 4
     subject to the strict limitations enumerated in the International Shoe case. Citizen Publishing Co.

 5
     v. United States, 394 U.S. 131, 136-39 (1969); United States v. Greater Buffalo Press, Inc., 402

 6
     U.S. 549, 555-56 (1971); United States v. Third Nat'l Bank in Nashville, 390 U.S. 171, 190-92

 7
     (1968). In none of these cases did the Supreme Court sustain the failing company defense.

 8
     Moreover, the terms in which the Court defined the defense, and the limits with which the Court

 9
     circumscribed it, show that it is not available to Hearst in this case.

10
              First, by definition, the defense is available only where the company to be acquired is

11
     failing or in extremis, not where the acquiring company claims to be failing. In Citizen Publishing,

12
     the Supreme Court, in describing the holding in International Shoe, stated, "The evidence showed

13
     that the resources of one company were so depleted and the prospect of rehabilitation so remote

14
     that 'it faced the grave probability of a business failure.'" 394 U.S. at 136. In United States v.

15
     Greater Buffalo Press, where Hearst was a defendant, the Court said that the failing company

16
     defense would be met "only if two requirements are satisfied: (1) that the resources of International

17
     [the acquired company] were 'so depleted and the prospect of rehabilitation so remote that it faced

18
     the grave probability of a business failure . . .' [citation to International Shoe omitted], and (2) that

19
     there was no other prospective purchaser for it."                    402 U.S. at 555.       The Court's specific

20
     requirement, in every case discussing the defense, that the acquired company's resources be "so

21
     depleted" as to threaten business failure necessitates that the defense cannot possibly apply where

22
     the allegedly failing company is the acquiring company. Obviously, the assets of the acquiring

23
     company cannot be "so depleted" as to threaten business failure if the acquiring company has

24
     sufficient assets to buy the profitable acquired company. If assets are depleted to the point where

25
     business failure is imminent, then the failing company cannot have sufficient assets to acquire a

26
     flourishing competitor. To allow the acquiring company to claim to be the failing company would

27
     expand the defense far beyond the Supreme Court's contemplation.

28
              Significantly, in Citizen Publishing, the Supreme Court concluded, "The burden of proving
     d:\docstoc\working\pdf\b4979b6e-050c-49d9-ab50-09f93a22ad22.rtf 18
29   COURT FILE NO: C 00 0119 VRW                                              PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                      REQUESTED CONCLUSIONS OF LAW
30

31
 1   that the conditions of the failing company doctrine have been satisfied is on those who seek refuge

 2   under it. That burden has not been satisfied in this case. We confine the failing company doctrine

 3   to its present narrow scope." 394 U.S. at 138-39; emphasis added. Nor has the Supreme Court

 4   subsequently stated or intimated that the defense should be expanded beyond its "narrow scope."

 5            The Ninth Circuit has similarly confined the defense within the narrow bounds established

 6   by the Supreme Court. Olin Corp. v. F.T.C., 986 F.2d 1295 (9th Cir. 1993) (rejecting "exiting

 7   assets defense"); F.T.C. v. Warner Communications, Inc., 742 F.2d 1156, 1164 (9th Cir. 1984)

 8   (rejecting a "weak company defense," which "would expand the failing company doctrine, a

 9   defense which has strict limits."); United States v. Phillips Petroleum Co., 367 F. Supp. 1226,

10   1259-60 (C.D. Cal. 1973), aff'd, 418 U.S. 906 (1974) ("The law is clear that evidence of a decline

11   in market position and varying profits and losses cannot be elevated to the status of a 'failing

12   company' by subjective statements of management intention or desire to go out of business if the

13   acquisition had not taken place."); United States v. Jos. Schlitz Brewing Co., 253 F. Supp. 129, 148

14   (N.D. Cal., aff'd, 385 U.S. 37 (1966) ("Allowing an acquiring company to successfully raise the

15   defense that its acquired former competitor showed declining sales and profits in the years

16   immediately preceding the acquisition surely would provide an exception to Section 7 large

17   enough to eviscerate the statute.").

18            Thus, the defense is strictly limited. To plaintiff's knowledge, it has never been applied to

19   the acquiring company.1 To permit its use by the acquiring company would make a mockery of the

20   requirement that the failing company's assets be depleted to the point of insolvency and failure.

21            Furthermore, on the factual record of this case, Hearst has not sustained the defense.

22   Within the JOA, The Examiner is profitable, and is expected to be so through 2005. This

23   undisputed fact alone puts quietus to the defense. Hearst attempts to circumvent this evidence by

24
     1
25    The closest any court has come is dictum in United States v. M.P.M., Inc., 397 F. Supp. 78, 97-98
     (D. Colo. 1975). In that case, the court sustained the merger on the ground that it would not
26   diminish competition in the relevant market. The merger at issue also involved a holding company
27
     acquiring two struggling ready-mix concrete companies, which were then combined. Although the
     court discussed applying the failing company defense to the acquiring company, this neither was
28   done nor was necessary to the result.
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
 1   various estimates, projections, and conjectures as to how The Examiner might fare apart from the

 2   JOA, or how The Chronicle might fare without The Examiner. Such estimates, however, have no

 3   basis in objective or historical fact or the actual accounting records of The Examiner, which

 4   admittedly do not exist for proving this point. Even were the law to permit a showing that the

 5   acquiring company is failing, sustaining the defense on the basis of the evidence in this record

 6   would open the defense to whatever accounting legerdemain a defendant could muster, and would

 7   totally demolish the tight limits the Supreme Court has taken such pains to erect. Given the

 8   strictures established by the Supreme Court, the proof offered in this case cannot be sufficient to

 9   establish the requisite depletion of resources and economic peril for a failing company.

10            A second insuperable problem faced by Hearst is that it has not satisfied and cannot satisfy

11   the requirement "that the company that acquires the failing company or brings it under dominion is

12   the only available purchaser." Citizen Publishing, 394 U.S. at 138. Hearst obviously cannot

13   satisfy this requirement because of the semantic, definitional problem that the failing company

14   must be the acquired company. Even beyond this problem, Hearst cannot show the absence of

15   purchasers for The Examiner because Hearst has never offered The Examiner for sale in its present

16   condition, as a party to the JOA. Key to the financial condition and viability of The Examiner is its

17   interest in the JOA, pursuant to which the San Francisco Newspaper Agency pays all production

18   and business expenses for The Examiner and then provides The Examiner with half the remaining

19   profits. Hearst specifically refused to offer The Examiner with its interest in the JOA, although the

20   record shows interested buyers willing to acquire The Examiner with its JOA participation, e.g.,

21   Knight-Ridder. Hearst therefore cannot show the absence of purchasers for The Examiner, as the

22   failing company defense requires.

23            Indeed, all Hearst can offer in the way of supporting authority are statements by the

24   Antitrust Division as to those conditions under which it would not challenge the dissolution of a

25   JOA. These statements, however, are not law, nor have they ever been adopted and applied in any

26   reported decision known to plaintiff. When such statements are arrayed against the repeated and

27   express parameters of the failing company defense in Supreme Court and Ninth Circuit opinions,

28
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
 1   they are wholly lacking in force and authority.

 2            In sum, The Examiner is not in fact failing; the failing company defense applies only to the

 3   acquired company and not the acquiring company; and Hearst has not established the defense in

 4   this case, either as a matter of fact, or as a matter of law.

 5
     REQUESTED CONCLUSION OF LAW #15: PLAINTIFF IS ENTITLED TO A
 6
     PERMANENT INJUNCTION PROHIBITING HEARST FROM PURCHASING THE
 7   CHRONICLE.

 8
              Inasmuch as Hearst's intended acquisition of The Chronicle violates section 7 of the

 9
     Clayton Act and sections 1 and 2 of the Sherman Act, plaintiff is entitled to a permanent injunction

10
     prohibiting Hearst from buying The Chronicle. Zenith Radio Corp. v. Hazeltine Research, 395

11
     U.S. at 130-31 (1969). As the Supreme Court has noted, "a federal court has broad power to

12
     restrain acts which are of the same type or class as unlawful acts which the court has found to have

13
     been committed or whose commission in the future unless enjoined, may fairly be anticipated from

14
     the defendant's conduct in the past." Zenith v. Hazeltine, 395 U.S. at 132. Here, since the

15
     acquisition will violate the antitrust laws, it must be enjoined.

16
              The more difficult question is whether the Court should go beyond this simple form of

17
     injunctive relief to attach conditions under which Hearst might at some future time acquire The

18
     Chronicle, or otherwise regulate the conduct of Hearst, whether in or out of the JOA. Certainly,

19
     the Court has the power to do so. National Soc'y of Professional Eng'rs v. United States, 435 U.S.

20
     679, 697-98 (1978); International Salt Co. v. United States, 332 U.S. 392, 400 (1947); California

21
     v. American Stores Co., 495 U.S. 271, 281 (1990) (Section 16 "states no restrictions or exceptions

22
     to the forms of injunctive relief a private plaintiff may seek, or that a court may order.")

23
              Indeed, this Court has ordered the parties to address in post-trial briefing the question, "If

24
     the evidence shows that, with the changes proposed by the Fang group, The Examiner will likely

25
     become a financially sound publication, are Hearst and CPC entitled to immunity under 15 U.S.C.

26
     § 1803 for continued operation of the JOA?" The Court's question appears to raise the possibility

27
     of an injunction not only prohibiting Hearst from buying The Chronicle, but also removing any

28
     antitrust immunity from the continuing JOA on the ground that both The Chronicle and The
     d:\docstoc\working\pdf\b4979b6e-050c-49d9-ab50-09f93a22ad22.rtf 21
29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
 1   Examiner are now likely to remain or become financially sound publications, thereby running

 2   afoul of 15 U.S.C. § 1803(a). As much as plaintiff would like to see the JOA stripped of its

 3   antitrust immunity, however, plaintiff does not ask the Court for this relief. First, under section

 4   1803, the relevant inquiry is not whether Hearst might profitably operate The Examiner today

 5   implementing the changes contemplated by the Fangs, but whether in 1965, at the time the JOA

 6   "was first entered into," The Examiner was not "likely to remain or become a financially sound

 7   publication." Second, the evidence is clear that the changes suggested by the Fangs will not result

 8   in a paper that is even a colorable equivalent or substitute for the current Examiner. A 40-page

 9   paper written by an editorial staff of 30 people will be less than a shadow of what the people of San

10   Francisco now receive. Third, removing the antitrust immunity will undoubtedly end the JOA,

11   under which San Francisco now has the benefit of two newspapers with independent editorial

12   voices, each financially healthy. Finally, an order removing the antitrust immunity of the JOA

13   might transmute this case into a private action for enforcement of the Newspaper Preservation Act,

14   a proceeding plaintiff has never intended to prosecute. For all these reasons, plaintiff does not

15   believe that the Court's injunction should address the issue of continuing antitrust immunity for the

16   JOA.

17            Besides the Court's question, there are two other questions that occur to plaintiff with

18   regard to the appropriate injunction to be entered against Hearst: first, whether the injunction

19   should extend only to the end of the JOA in 2005; and, second, whether the injunction should exist

20   only so long as Hearst is unable to produce a credible buyer for The Examiner (e.g., the injunction

21   might lift on Hearst's selling The Examiner to Knight-Ridder with its interest in the JOA). Plaintiff

22   has considered both questions, and believes the appropriate answer to be for the Court simply to

23   enter a permanent injunction prohibiting Hearst's purchase of The Chronicle. In the event that

24   circumstances change, whether by the termination of the JOA in 2005 or by the sale of The

25   Examiner to a legitimate buyer, then Hearst would be free to petition this Court for relief from the

26   injunction. International Salt Co. v. United States, 332 U.S. at 400. ("The usual ways to the

27   prohibited goal may be blocked against the proven transgressor and the burden put upon him to

28
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
 1   bring any proper claims of relief to the court's attention.") Given the uncertainty of predicting the

 2   future, and given that Hearst has clearly violated the antitrust laws, there is no need for this Court to

 3   imagine or craft conditions that would enable Hearst to avoid the injunctive relief that must

 4   necessarily issue. Rather, the burden appropriately belongs on Hearst to reapply to this Court for

 5   relief from the injunction should circumstances change.

 6
     REQUESTED CONCLUSION OF LAW #16: PLAINTIFF IS ENTITLED TO A
 7
     PERMANENT INJUNCTION PROHIBITING HEARST FROM TRANSFERRING THE
 8   EXAMINER TO THE FANGS, AND PROHIBITING THE FANGS FROM ACQUIRING
     THE EXAMINER FROM HEARST.
 9
              Likewise, this Court should permanently enjoin the Fangs from acquiring The Examiner
10
     from Hearst. The Fang transaction is part and parcel of the illegal scheme of defendants to give
11
     Hearst ownership of The Chronicle. As such, it is to be enjoined as one of "the fruits of
12
     monopolistic practices or restraints of trade." United States v. Paramount Pictures, 334 U.S. at
13
     152-53, 171; United States v. Grinnell Corp., 384 U.S. 563, 577 (1966).
14

15   REQUESTED CONCLUSION OF LAW #17: THE RIGHT OF FIRST REFUSAL AND
     60-MILE CLAUSES IN THE JOA CONSTITUTE AN UNREASONABLE RESTRAINT
16
     OF TRADE IN THE RELEVANT MARKET IN VIOLATION OF SECTION 1 OF THE
17   SHERMAN ACT; AND HEARST'S ENFORCEMENT OF THOSE CLAUSES
     CONSTITUTES AN UNREASONABLE RESTRAINT OF TRADE IN THE RELEVANT
18   MARKET IN VIOLATION OF SECTION 1 OF THE SHERMAN ACT AND AN
19
     ATTEMPT TO MONOPOLIZE THE RELEVANT MARKET IN VIOLATION OF
     SECTION 2 OF THE SHERMAN ACT.
20
              The same right to injunctive relief exists with respect to the right of first refusal and
21
     60-mile non-compete clause in the JOA, both of which were demonstrably used by Hearst to
22
     exclude other buyers of The Chronicle. Neither term is intrinsic or necessary to the JOA, or
23
     authorized by the Newspaper Preservation Act. Neither term furthers the policy of the JOA of
24
     preserving business health of newspapers or independent editorial voices. Here, Hearst used both
25
     terms to frustrate the purposes of the Newspaper Preservation Act, and to bootstrap itself into a
26
     monopoly. Subsection c of 15 U.S.C. § 1803 specifically withholds antitrust immunity from "any
27
     predatory practice, or any other conduct in the otherwise lawful operations of a joint newspaper
28
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
 1   operating arrangement which would be unlawful under any antitrust law if engaged in by a single

 2   entity." From the dawn of the antitrust laws, courts have held unlawful the use of non-compete

 3   agreements, such as the 60-mile clause, when used in furtherance of monopoly or cartelization.

 4   United States v. American Tobacco Co., 221 U.S. 106, 163, 174-75, 182-83 (1911); Eastman

 5   Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 368-69 (1927); United States v.

 6   Crescent Amusement Co., 323 U.S. 173-181 (1944); Schine Chain Theatres, Inc. v. United States,

 7   334 U.S. 110, 119 (1948) ("Even an otherwise lawful device may be used as a weapon in restraint

 8   of trade or in an effort to monopolize a part of trade or commerce. Agreements not to compete

 9   have at times been used for that unlawful purpose."). The right of first refusal accomplishes the

10   same purpose as the 60-mile clause, and is therefore equally unlawful. Associated Press v. United

11   States, 326 U.S. 1, 14 (1945) ("But however innocent such agreements might be, standing alone,

12   they would assume quite a different aspect if utilized as essential features of a program to hamper

13   or destroy competition."); United States v. Paramount, 334 U.S. at 148 ("For equity has the power

14   to uproot all parts of an illegal scheme—valid as well as the invalid—in order to rid the trade or

15   commerce of all taint of the conspiracy."). Since neither cause furthers any legitimate purpose of

16   the JOA or is exempted from liability by the Newspaper Preservation Act, and since both clauses

17   would be unlawful if employed by a single actor in furtherance of a monopoly, they enjoy no

18   antitrust immunity, and Hearst should be permanently enjoined from their future enforcement.

19

20

21

22

23

24

25

26

27

28
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29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
30

31
     REQUESTED CONCLUSION OF LAW #18: PLAINTIFF IS ENTITLED TO A
 1
     PERMANENT INJUNCTION PROHIBITING HEARST FROM ENFORCING ITS
 2   RIGHT OF FIRST REFUSAL OR THE 60-MILE CLAUSE UNDER THE JOA TO
     PREVENT OR IMPEDE CPC FROM SELLING THE CHRONICLE.
 3
              See discussion, supra. Because Hearst's enforcement of the clauses has excluded other
 4
     buyers of The Chronicle, Hearst has perforce used these clauses to foreclose and prevent
 5
     newspaper competition, so as to create a significant threat of injury to plaintiff from an impending
 6
     violation of the antitrust laws, thereby entitling plaintiff to injunctive relief.
 7

 8   REQUESTED CONCLUSION OF LAW #19: PURSUANT TO SECTIONS 4 AND 16 OF
     THE CLAYTON ANTITRUST ACT, 15 U.S.C. §§ 15, 26, PLAINTIFF IS ENTITLED TO
 9
     RECOVER FROM DEFENDANTS, JOINTLY AND SEVERALLY, HIS COST OF SUIT,
10   INCLUDING A REASONABLE ATTORNEY'S FEE.

11            Section 16 of the Clayton Act, 15 U.S.C. § 26, provides, "in any action under this section in

12   which the plaintiff substantially prevails, the Court shall award the cost of suit, including a

13   reasonable attorney's fee, to such plaintiff."

14

15                                                              Respectfully submitted,

16   Dated: May 23, 2000.                             ALIOTO LAW FIRM
                                                           Joseph M. Alioto
17                                                         Angelina Alioto-Grace, Pro Hac Vice
18
                                                           One Embarcadero Center, 39th Floor
                                                           San Francisco, CA 94111
19                                                         Telephone: 415-434-8900
20
                                                                SHULMAN, WALCOTT & SHULMAN, P.A.
21

22
                                                                By:___________________________________
23
                                                                      Daniel R. Shulman, Pro Hac Vice
24                                                                    Jim Hilbert, Pro Hac Vice
                                                                121 West Franklin Avenue
25                                                              Minneapolis, MN 55404
                                                                Telephone: 612-871-2909
26

27                                                              Attorneys for Plaintiff Clinton Reilly

28
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29   COURT FILE NO: C 00 0119 VRW                                               PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                       REQUESTED CONCLUSIONS OF LAW
30

31
 1                                                   PROOF OF SERVICE

 2
             I, the undersigned, declare that I am, and was at the time of service of the papers herein
 3   referred to, over the age of 18 years and not a party to the within action or proceeding. My business
     address is Shulman, Walcott & Shulman, P.A., 121 West Franklin Avenue, Minneapolis,
 4   Minnesota 55404. I am readily familiar with the practice at my place of business for collection and
     processing of correspondence.
 5

 6            On May 23, 2000, I served the following document(s):

 7            PLAINTIFF'S MEMORANDUM IN SUPPORT OF REQUESTED CONCLUSIONS
 8
              OF LAW

 9   by Federal Express as follows:
10
              Gary L. Halling, Esq.
11            Thomas D. Nevins, Esq.
              SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
12            Four Embarcadero Center, 17th Floor
              San Francisco, CA 94111
13
              Facsimile: 415-434-3947
14
              J. Thomas Rosch, Esq.
15            Gregory P. Lindstrom, Esq.
              Peter K. Huston, Esq.
16
              LATHAM & WATKINS
17            505 Montgomery Street, Suite 1900
              San Francisco, CA 94111-2562
18            Facsimile: 415-395-8095
19
              David M. Balabanian, Esq.
20            MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP
              Three Embarcadero Center
21
              San Francisco, CA 94111
22            Facsimile: 415-393-2286

23          I declare that I am employed in the office of counsel permitted to practice before this Court
     pro hac vice, at whose direction the service was made and declare under penalty of perjury that the
24
     foregoing is true and correct.
25
              Executed this 23rd day of May, 2000, at Minneapolis, Minnesota.
26
                                            ________________________________________
27
                                                  Gayle M. Schaub, Legal Assistant, RP
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     d:\docstoc\working\pdf\b4979b6e-050c-49d9-ab50-09f93a22ad22.rtf 26
29   COURT FILE NO: C 00 0119 VRW                                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF
                                                                                 REQUESTED CONCLUSIONS OF LAW
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