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SCOTT PUBL. CO. v. COLUMBIA BASIN PUBLRS.

December 4, 1959

SCOTT PUBLISHING CO., Inc., Plaintiff,
v.
COLUMBIA BASIN PUBLISHERS, INC.; Howard Parish and Associates, Inc.; Howard W. Parish; James M. Bryce; Kennewick-Pasco Typographical Union No. 831; Unitypo, Inc.; International Typographical Union; Woodruff Randolph; Don Hurd; Walter D. Marvick; Charles M. Lyon; Harold H. Clark; Joe Bailey; Francis E. McGlothlin; A. L. Wilie; Seattle Typographical Union No. 202; and Allied Printing Trades Council of Seattle, Defendants



The opinion of the court was delivered by: MURRAY

This cause came on regularly for trial before the Honorable W. D. Murray, United States District Judge for the District of Montana, sitting by designation in the Western District of Washington, Northern Division, without a jury, commencing on the 8th day of September, 1959. Appearances: Mr. Carl A. Jonson, of Messrs. Johnson, Jonson & Inslee, Attorneys at Law, Seattle, Washington, and Mr. Howard M. Downs and Mr. Robert D. Raven, of Messrs. Morrison, Foerster, Holloway, Shuman & Clark, Attorneys at Law, San Francisco, California, appeared for the plaintiff; Mr. Joseph A. Barto of Messrs. Lundin, Barto and Goucher, Attorneys at Law, Seattle, Washington, appealed for the defendants Columbia Basin Publishers, Inc., Howard Parish and Associates, Inc., Howard W. Parish and James M. Bryce; Mr. Alfred J. Schweppe, Mr. Marion A. Marquis and Mr. Fredric C. Tausend, of Messrs. McMicken, Rupp & Schweppe, Attorneys at Law, Seattle, Washington, appeared for the remaining defendants, and Mr. Sidney Dickstein, of Messrs. Dickstein, Shapiro & Galligan, Attorneys at Law, New York City, New York, also appeared for the defendants International Typographical Union and Unitypo, Inc.

The action was commenced in 1955. Defendants, in addition to those presently remaining in the case, were brought in and subsequently dismissed. Extensive pre-trial discovery procedures were undertaken by both sides. The trial commenced before the Court, sitting without a jury, on September 8, 1959, and consumed two months. A record of over 7,300 typewritten pages was compiled and over 500 exhibits were marked in evidence. During the trial much of the evidence was received over objection on reserved rulings, and several questions of law were presented. However, in considering the case after all the evidence was in and after able arguments by counsel for all parties, the Court has concluded that the case involves essentially a determination of the factual issues presented, and when that determination has been made, as it has, the law questions pass out of the case. In making the determination the Court has considered all of the evidence, including that which was received on reserved rulings.

 Plaintiff brought this action under Sections 15 and 26, Title 15, U.S.C.A., charging defendants with combining and conspiring together for the purpose of destroying and driving out of business the Tri-City Herald, a daily newspaper published by plaintiff in the Tri-City area of the State of Washington, in order to create a monopoly for the Columbia Basin News in the daily newspaper business in that area, in violation of the anti-trust laws, and specifically Sections 1, 2, 13, 14 of Title 15, U.S.C.A.

 Scott Publishing Company, the plaintiff herein, is a corporation organized under the laws of the State of Washington, on September 17, 1947, and since November, 1947, has been and still is engaged in the business of publishing The Tri-City Herald, a daily evening news paper at Kennewick, Washington, and distributing such newspaper throughout the Tri-City area, as that area will be hereinafter more specifically referred to and described.

 In the publication of The Tri-City Herald, Scott Publishing Company is engaged in interstate commerce. Newsprint is purchased from sources outside the State of Washington, national and international news is gathered and disseminated; national as well as local advertising is sold and published, and the Herald is distributed by mail and other means outside of the State of Washington.

 The principal founders, officers and stockholders of Scott Publishing Company are Robert F. Philip, who has been president of the corporation since its formation, and Glenn C. Lee, who has been Secretary-Treasurer since the inception of the corporation. Glenn C. Lee has been publisher of the Tri-City Herald and Philip has assisted in its management. Lee and Philip, though experienced businessmen in other fields, had no experience in the newspaper publishing business prior to their entering that field in the Tri-City area.

 The Tri-City area consists of the cities of Kennewick and Richland in Benton County, Washington, and the City of Pasco in Franklin County, Washington, and the area surrounding those three cities. Formerly Pasco and Kennewick were small farming communities on the Columbia River, and Richland was non-existent, but with the end of World War II and the advent of atomic energy, the Hanford Atomic Works was constructed and Richland was established on government land with government owned houses and buildings to house the workers at the Atomic Energy plant. In the fall of 1947, McNary Dam was constructed on the Columbia River at a point some 14 miles from Kennewick and additional dams were planned for the development of the Columbia Basin. Public power was available in the area and irrigation projects were established, all of which led to a substantial growth of the area in population and economic activity. By 1947, there was a population of around 50,000 in the Tri-City area, and its future economic potential seemed very great.

 In 1947, Lee and Philip, who were then in the import-export business, became aware of the Tri-City area and its potential for future development and learned that the Pasco Herald, a weekly newspaper, job printing shop and office supply business in Pasco, Washington, was for sale. At about the same time Lee and Philip became acquainted with one Hugh Scott, a man who had had some newspaper experience, and the three decided to form Scott Publishing Company, the plaintiff herein, and purchase the Pasco Herald, which they did, agreeing to pay the former owner a total of $ 80,000, plus the inventory. Scott Publishing Company took possession of the property on October 1, 1947. Scott ceased to be an officer and director of Scott Publishing Company in 1949.

 Scott Publishing Company operated the job shop and office supply business and continued to publish the Pasco Herald as a weekly paper until November 13, 1947. The operation was a profitable one. The potential growth factors of the Tri-City area were such that Scott, Lee and Philip decided that a daily newspaper would be successful in the area, and within a matter of weeks after Scott Publishing Company took possession of the Pasco Herald, publication of a daily newspaper was planned, and on November 13, 1947, the first issue of a daily paper was published. Initially the paper was published 5 days a week, but in January, 1949, a Sunday issue was added, and ever since, the paper has been published six days a week, excluding Saturday. The name of the paper was charged from the Pasco Herald to the Tri-City Herald when daily publication commenced.

 The conversion of the weekly Pasco Herald to the daily Tri-City Herald was almost an immediate success, but it raised serious problems for Scott Publishing Company. The expanded operation required more personnel of all kinds, the opening of additional offices in Kennewick and Richland, additional newsprint, which at the time was difficult to obtain. The plant and press were inadequate to handle the publication of a daily newspaper. Skilled mechanical workmen necessary for the expanded operation were not available locally and had to be recruited from all over the Pacific Northwest and even further afield. Distribution of the weekly Herald had been by mail from the single Pasco office and the conversion to a daily required the establishment of carrier organizations and offices in the three cities. And ever present was the need for sufficient capital to carry on the expanded operation.

 Scott Publishing Company with great difficulty met and solved the problems. Personnel were recruited and trained, additional offices were opened, and in 1948, in the late summer, a larger press was obtained, together with a building in Kennewick to house it, and at that time the Tri-City Herald moved from Pasco to Kennewick. However, the newsprint problem and the problem with respect to sufficient working capital remained.

 The defendant Howard W. Parish is a man who spent most of his life in the newspaper business, a substantial part of it in and around the Pacific Northwest. He has had experience in all phases of the newspaper business, but predominately in circulation and management. He formerly was publisher of the Seattle Star, a daily newspaper published in Seattle, Washington, until 1946, when it ceased publication. When the Seattle Star went out of business, Parish acquired a stock interest in The Craftsman Press, Inc., a large commercial printing establishment in Seattle and held the office of Secretary-Treasurer of that company.

 Parish traveled throughout the State of Washington on business of The Craftsman Press, Inc., and became acquainted with the Tri-City area as a result of such travels. He acquired additional information concerning the Tri-City area by reading a report prepared by one Earl McCallum, an expert in the newspaper field with reference to the newspaper business in the Tri-City area. Furthermore, at some time prior to February, 1949, Scott Publishing Company had prepared a brochure advertising the Tri-City area and the Tri-City Herald which was to be used to attract national advertising. Because Scott Publishing Company was not equipped to print in color, and as the brochure was to be prepared in color, Scott Publishing Company had the printing done by The Craftsman Press, Inc., in Seattle, and Parish became familiar with the data contained in that brochure and likewise met Lee and Philip in connection with their newsprint problem and also in connection with the printing of the brochure in February, 1949. Parish also had acquired considerable information concerning the background of Lee and Philip and the Scott Publishing Company and the difficulties which they were encountering in the publication of the Tri-City Herald and particularly the financial problems with which they were faced.

 As a result of all this information Parish became interested in getting into the newspaper business in the Tri-City area. He acquired the financial backing of several substantial business men in Seattle and in April or May of 1949, he telephoned Philip and asked if Scott Publishing Company was interested in selling the Tri-City Herald. Philip informed him that they might be interested in selling if a price could be agreed upon. At that time the Scott Publishing Company was very much in need of additional working capital and Philip and Lee arranged a meeting with Parish at which they hoped to interest Parish in the purchase of stock in the Scott Publishing Company, or possibly sell him the Tri-City Herald.

 At the meeting Parish informed Lee and Philip that he was not interested in purchasing a minority interest, but stated he was interested in purchasing the controlling interest or the entire property. Lee and Philip set the price at $ 410,000 for the entire company which Parish considered too high and he offered $ 250,000 and no agreement was reached.

 As stated before, Parish was aware of the tremendous possibilities of the Tri-City area. He was also familiar with the background of Lee and Philip, their inexperience in the newspaper business in contrast to his own wide experience in that business. He was likewise familiar with the constant financial problems which Scott Publishing Company was continuously struggling with, whereas he felt that he, through his associates, had ample financial backing, and because of all of these factors which seemed to weigh so heavily in his favor and against Philip and Lee, he believed there was a golden opportunity for him in the newspaper business in the Tri-City area. At the meeting with Lee and Philip, when the purchase of the Tri-City Herald was discussed, Parish pointed out these things to Philip and Lee and stated that he would start a newspaper in the Tri-City area to compete with them and that they would end up by having to sell their newspaper to Parish at 5 cents on the dollar.

 Thereafter, in August, 1949, the defendant Columbia Basin Publishers, Inc., was incorporated. The original incorporaters were Parish, the defendant James M. Bryce, who is Parish's son-in-law, and John X. Johnson, one of the Seattle business men associated with Parish, and who subsequently furnished the principal financial support of the Columbia Basin Publishers, Inc., in its early days, together with several other Seattle business men.

 The Columbia Basin Publishers, Inc., commenced publication of the Pasco News, a weekly newspaper at Pasco in August, 1949. The circulation of the Pasco News was on a free distribution basis. The publication of the Pasco News on a weekly basis continued until November, 1949, when publication was stepped up to bi-weekly, and at that time acquisition of the facilities to publish a daily newspaper was commenced. As a weekly newspaper the Pasco News competed with the Tri-City Herald for advertising within the Tri-City area and particularly in Pasco. However, at no time before Columbia Basin Publishers, Inc., commenced publication of the daily Columbia Basin News, under the circumstances hereinafter set forth, had the Pasco News, either as a weekly or a biweekly, earned a profit.

 Prior to August, 1949, members of the Typographical Union in the Tri-City area had been under the jurisdiction of the local Typographical Union at Walla Walla, Washington, which is some 50 miles away from the Tri-City area. Because of this distance, members of the Typographical Union in the Tri-City area desired to form their own local and in August, 1949, the defendant Kennewick-Pasco Local 831 was chartered and affiliated with the International Typographical Union. At some time prior there had been a contract between the Typographical Union through the Walla Walla local with the predecessor of the Scott Publishing Company, but before Scott Publishing Company took over, that contract had expired and there was no contract concerning terms of employment between the Typographical Union and Scott Publishing Company.

 Originally the Union's demand was for $ 95.00 a week for 37 1/2 hours work, which was the Seattle scale at that time, but this demand was compromised for the $ 90.00 figure and the 38 3/4 hours.

 Thereafter Local 831 commenced negotiations with Scott Publishing Company. Not getting anywhere with the negotiations the Local Union requested assistance from the I.T.U. and special representatives of the President of the I.T.U., Whiting and Marvick, came into the area and participated in the negotiations. When the representatives of the I.T.U. appeared in the negotiations, Scott Publishing Company appealed to Pacific Northwest Newspaper Publishers Association for assistance in the negotiations and one D. S. Haines, Secretary of that Association joined in the negotiations on behalf of Scott Publishing Company.

 The union people took the position that the only thing they could accept from Scott Publishing Company was the same contract which they had secured from the other employers in the area. Scott Publishing Company felt it could not pay the scale of $ 90.00 a week for 38 3/4 hours of work and likewise felt that certain provisions of the contract which had been signed by the other employers were illegal and therefore that it could not execute such a contract. At that time the wages paid by the Scott Publishing Company were $ 80.00 a week for 40 hours work. While the raise to $ 90.00 a week, which the Union demanded, was somewhat higher than was then being paid in other comparable communities in the State of Washington, and the northwest, it was not an unreasonable demand for the Union to make upon Scott Publishing Company, particularly in view of the fact that the other employers in the area had agreed to such a wage. After having secured such a contract from the other employers, the Union could not in fairness to them have accepted anything less from Scott Publishing Company. There is no evidence that the other three employers did not enter such contract in good faith. As has been pointed out, Scott Publishing Company was given the opportunity to join with the other three employers in their negotiations with ...


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