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Smart Summary

Factual and Procedural Background

The plaintiffs, Caldwell-Clements, Inc. and Maurice Clements, are publishers of trade magazines in the radio and television field. They allege that the defendants, Cowan Publishing Corp. and Sandford R. Cowan, conspired with other competing publishing corporations to restrain trade in the service dealer trade publishing field by distributing false and malicious statements to plaintiff's advertisers and prospective advertisers. The false statements accused the plaintiff corporation of greatly overstating its circulation figures. Additionally, the plaintiff alleges copyright infringement and unfair competition based on the defendant copying or using its copyrighted advertising directories. The plaintiff also asserts a libel claim based on the same allegedly false statements involved in the antitrust claim.

The defendants moved to dismiss the complaint, which consists of three counts: (1) treble damages under Section 1 of the Sherman Anti-Trust Act; (2) copyright infringement and unfair competition; and (3) libel. The court addresses these motions to dismiss under Federal Rules of Civil Procedure 12(b)(6) and 56.

Legal Issues Presented

  1. Whether the complaint states a valid claim under Section 1 of the Sherman Anti-Trust Act for conspiracy to restrain trade through concerted distribution of false statements.
  2. Whether the plaintiff states a claim for copyright infringement and unfair competition based on the alleged copying or use of its copyrighted advertising directories.
  3. Whether the court has federal jurisdiction over the libel claim despite the identity of citizenship between the corporate plaintiff and defendants.

Arguments of the Parties

Defendants' Arguments

  • As to the antitrust claim, defendants argue that a corporation and its agents cannot conspire among themselves, thus the conspiracy claim is insufficient.
  • They contend the allegations amount only to trade libel or a competitive tort, not a restraint of trade under the Sherman Act.
  • They assert that the complaint alleges conclusions rather than specific facts, failing to meet the specificity requirements for conspiracy claims.
  • Regarding the copyright claim, defendants argue that since some names listed in the plaintiff's directories are also found in other publishers' directories, the plaintiff cannot claim infringement.
  • For the libel claim, defendants assert lack of federal jurisdiction due to the identity of citizenship between the corporate plaintiff and defendants.

Plaintiffs' Arguments

  • The plaintiffs allege a conspiracy among multiple independent competitors, not merely a corporation and its agents, satisfying the requirement for alleging conspiracy under the Sherman Act.
  • The concerted action aimed to reduce plaintiff's ability to compete in the interstate market, elevating the claim beyond a private tort to a public policy concern under antitrust law.
  • The complaint specifies the object, means, and overt acts of the conspiracy with sufficient particularity.
  • They argue that the existence of common sources for names does not negate copying if the defendant actually copied from their directory.
  • The libel claim, brought by the individual plaintiff, involves parties of diverse citizenship, thus supporting federal jurisdiction despite the corporate plaintiff's citizenship.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Nelson Radio Supply Co. v. Motorola, Inc., 5 Cir., 200 F.2d 911 (1952) Corporation and its agents cannot conspire among themselves for purposes of conspiracy law. Court acknowledged this view but found it inapplicable because the alleged conspiracy included multiple independent competitors.
Marion County Co-op. Ass'n v. Carnation Co., D.C.W.D.Ark. 114 F. Supp. 58 (1953), affirmed 214 F.2d 557 (8 Cir. 1954) Similar to Nelson Radio, addresses corporation-agent conspiracy issue. Referenced to show some cases support defendants’ corporate-agent conspiracy argument, but court found broader conspiracy alleged.
Interstate Circuit v. United States, 306 U.S. 208, 59 S.Ct. 467, 83 L.Ed. 610 (1939) Concerted action among competitors with purpose and effect of restraining trade violates Sherman Act. Court relied on this principle to elevate the alleged conspiracy from private tort to antitrust violation.
Paramount Pictures v. United Motion Picture Theatre Owners, 3 Cir., 93 F.2d 714 (1937) Use of "peaceful persuasion" by distribution of false statements does not insulate from antitrust liability. Court cited this to reject defendants’ argument that peaceful means exclude antitrust liability.
Glenn Coal Co. v. Dickinson Fuel Co., 4 Cir., 72 F.2d 885 (1934) Specificity required in alleging conspiracy claims. Court held that the complaint met the specificity requirement.
Metropolitan Theatre Co. v. Warner Bros. Pictures, D.C.S.D.N.Y. 12 F.R.D. 516 (1952) Conspiracy claims require specificity. Referenced to support the court’s conclusion that the complaint was sufficiently detailed.
Sheppard v. Atlantic States Gas Co., 3 Cir., 167 F.2d 841 (1948) Joinder rules should not frustrate federal jurisdiction over claims with diverse citizenship. Court used this to support federal jurisdiction over the libel claim despite partial identity of citizenship.
Strawbridge v. Curtis, 3 Cranch 267, 7 U.S. 267, 2 L.Ed. 435 (1806) Complete diversity rule for federal jurisdiction. Court noted this rule but found it inapplicable due to the nature of the claims and joinder rules.

Court's Reasoning and Analysis

The court first addressed the antitrust claim, rejecting the defendants' argument that a corporation and its agents cannot conspire among themselves by noting the complaint alleges a conspiracy including multiple independent competitors. The court emphasized that the alleged concerted action aimed at reducing plaintiff’s competitive ability in an interstate market elevates the claim beyond a private tort to a public policy issue under the Sherman Act. The court found that the use of false written statements as a means of "peaceful persuasion" does not shield defendants from liability. It also found that the complaint sufficiently alleges the object, means, and overt acts of the conspiracy with the required specificity.

Regarding the copyright infringement claim, the court rejected defendants’ argument that the presence of common sources for names negates infringement, clarifying that the ultimate issue is whether copying occurred. The court noted, however, in an obiter dictum, that use of the directory for solicitation absent copying is not protected under copyright law but might support unfair competition claims.

For the libel claim, the court found that federal jurisdiction exists despite the identity of citizenship between the corporate plaintiff and defendants because the individual plaintiff asserts the libel claim independently. The court reasoned that joinder rules and removal statutes permit federal courts to hear such claims when joined with federal claims or claims involving diverse parties, thus preserving the purpose of the joinder rules.

The court denied the defendants’ motion to dismiss in all respects, finding triable issues of fact and jurisdictional grounds sufficient to proceed.

Holding and Implications

The court DENIED the defendants' motion to dismiss the complaint in all respects.

This decision allows the case to proceed on all three counts: the antitrust claim under the Sherman Act, the copyright infringement and unfair competition claim, and the libel claim. The ruling confirms that allegations of concerted action among multiple competitors involving false statements can state a claim under the Sherman Act, that copyright infringement claims focus on actual copying regardless of common sources, and that federal jurisdiction can be maintained over joined claims involving diverse citizenship despite some parties sharing citizenship. The court’s decision does not establish new precedent but applies established legal principles to deny dismissal and preserve the plaintiffs’ claims for trial.

CALDWELL-CLEMENTS, Inc. and Maurice Clements, Plaintiffs, v. COWAN PUBLISHING CORP. and Sandford R. Cowan, Defendants.

IRVING R. KAUFMAN, District Judge.

The defendants move to dismiss the complaint consisting of three claims, each stated in a separate count.

The first claim is for treble damages based upon Section 1 of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1. Defendant asks dismissal of the count for failure to state a claim. The plaintiffs and defendants are publishers of rival trade magazines in the radio and television field. Plaintiff corporation alleges that the defendant publishing corporation, some of its employees, the individual defendant publisher "conspired among themselves" and with certain other named publishing corporations competing with the plaintiff to restrain trade "in the service dealer trade publishing field by reducing Caldwell-Clements' competition in such field through concerted distribution, by each and all of them of * * * false and malicious statements to Caldwell-Clements' advertisers and prospective advertisers." (Par. 20). The allegedly false written statements were to the effect that plaintiff corporation had greatly over-stated its circulation figures in its publications. The defendants' first objection to this count is that it is insufficient to allege that the defendant corporation, its publisher and some of its employees "conspired among themselves" because a corporation and its agents are not separate legal entities for the purposes of the law of conspiracy. While some of the cases support this view, Nelson Radio Supply Co. v. Motorola, Inc., 5 Cir., 1952, 200 F.2d 911; Marion County Co-op. Ass'n v. Carnation Co., D.C.W.D.Ark. 1953, 114 F. Supp. 58, affirmed on other grounds, 8 Cir., 1954, 214 F.2d 557, it is sufficient, for the rejection of this contention, to point out that the complaint also alleges a conspiracy including as its participants not only the corporation and its agents but also a large number of independent corporate competitors in the publishing field. The second and more basic contention is that what is alleged is, at most, a trade libel or competitive tort, not a restraint of trade. This is not supportable because the root of the evil, and the circumstance which lifts the claim out of the realm of private law and into the aegis of public policy, is the concert of action here alleged, See Interstate Circuit v. United States, 1939, 306 U.S. 208, 226, 59 S.Ct. 467, 83 L.Ed. 610, by competitors with the specific purpose and result of "reducing" plaintiff corporation's ability to compete in the specific interstate market delineated in the complaint: "the service dealer trade publishing field" (Par. 20). That the means chosen to accomplish this end were the "peaceful persuasion" of plaintiff's actual and prospective advertiser-customers by the distribution of false writings concerning plaintiff's business methods does not insulate the defendants from liability. Cf. Paramount Pictures v. United Motion Picture Theatre Owners, 3 Cir., 1937, 93 F.2d 714, 719-720. The last but least contention of the defendants with respect to this claim is that conclusions, rather than specific facts, are alleged. It is true that claims of conspiracy should be alleged with some specificity. Compare Glenn Coal Co. v. Dickinson Fuel Co., 4 Cir., 1934, 72 F.2d 885, 887 with Metropolitan Theatre Co. v. Warner Bros. Pictures, D.C.S.D.N.Y. 1952, 12 F.R.D. 516. This requirement has been met in the instant case. The object and result of the conspiracy are alleged: causing plaintiff's actual and potential customers to refuse to deal with him; the means chosen and the overt acts performed are alleged: concerted distribution of false statements, the contents of which are set out in full.

This branch of the motion is based upon both Rules 12(b)(6) and 56, 28 U.S.C.A. After examining the affidavits presented, this Court concludes that there is a wealth of triable factual issues as to the existence of a conspiracy in violation of Section 1, and, therefore, summary judgment must be denied. The balance of this Court's discussion will be addressed to the Rule 12(b)(6) ground of this branch of the motion.

The second count (copyright infringement and unfair competition) is sought to be dismissed for failure to state a claim. Plaintiff corporation alleges that the defendant corporation copied one or more of its copyrighted advertising directories. Defendants' contention is that since some of the names listed in the directories were also listed in other directories distributed by other publishers the plaintiff's directory cannot be infringed. This theory is completely without merit. The availability to a defendant of other "common sources" for obtaining these names is not a defense to an action for copyright infringement if the defendant actually copied the names from plaintiff's directory. The ultimate probandum is copying — the existence of "common sources" is merely evidence negating copying.

While I am limited to the face of the complaint in determining this motion to dismiss under F.R.C.P. 12(b)(6), the case being inappropriate for treatment as a motion converted into one under F.R.C.P. 56 for summary judgment, I take this occasion to note obiter that the gravamen of this claim, as it appears from the affidavits and briefs in conjunction with the complaint, appears to be that the corporate defendant used, rather than copied, plaintiff's extensively published directory to solicit by mail customers listed in it without plaintiff's permission. This is alleged to constitute an "infringement" of the copyright (Par. 8). Although actual copying in the sense of physical reproduction of the form, arrangement and content of the original directory is given copyright protection, the use absent copying, of another's directory solely for mail solicitation purposes is not within the protection of the copyright laws (though it may possibly be sufficient for the purposes of an unfair competition claim). Certainly one who copyrights a compilation or directory of names cannot be said to gain a monopoly, under the copyright statute, over business dealings with those listed. 17 U.S.C. § 1.

The third count (Libel) is based upon the same allegedly false statements as are involved in the anti-trust claim. Defendants' sole contention as to this count is that the Court lacks federal jurisdiction because of the identity of citizenship between the corporate plaintiff and both defendants. The corporate plaintiff, corporate defendant and individual defendant are citizens of New York, and the individual plaintiff is a citizen of New Jersey. While the rule usually applicable to a multiple party situation is that there must be complete diversity between the plaintiffs, on the one hand, and the defendants, on the other hand, Strawbridge v. Curtis, 3 Cranch 267, 7 U.S. 267, 2 L.Ed. 435, this rule is inapplicable to a situation where the co-citizen plaintiff does not have a "joint" interest with the other plaintiff in the state-created claim. Only the individual plaintiff is asserting the state-created libel claim against both defendants; the corporate co-citizen plaintiff is not a party to the libel claim. The libel claim, if it had been brought as an independent action in this court would have had a jurisdictional basis. To have the liberal federal practice rules of joinder of parties and claims operate to foreclose litigation of this claim jointly with the other clearly cognizable federal claims even though the libel claim solely concerns parties of diverse citizenship would defeat the very purpose of the joinder rules. Cf. Sheppard v. Atlantic States Gas Co., 3 Cir., 1948, 167 F.2d 841. If a Federal Court is empowered under the removal statute to hear usually non-removable claims when they are joined with "a separate and independent claim * * which would be removable if sued upon alone," 28 U.S.C. § 1441(c), then a case consisting of: (1) a separate and independent libel claim supported by diverse citizenship, and (2) two federal claims certainly should be originally cognizable in this court.

The motion is denied in all respects. So ordered.

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CALDWELL-CLEMENTS, INC. v. COWAN PUBLISHING CORP., (S.D.N.Y. 1955)
(Mar 29, 1955)