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August 21, 1964

JOHN J. & WARREN H. GRAHAM, a partnership

The opinion of the court was delivered by: HIGGINBOTHAM

This is an action for preliminary injunction instituted by plaintiffs, John and Warren Graham, suburban-Philadelphia newsdealers, seeking to enjoin defendant, Triangle Publications, Inc. (Triangle), owner and publisher of The Philadelphia Inquirer, from refusing to sell the Inquirer to plaintiffs, and alleging, inter alia, that Triangle's refusal to deal is prohibited by Section 1 of the Sherman Act. *fn1"

Triangle, on the other hand, filed a counterclaim against plaintiffs, joining 13 other suburban newsdealers *fn2" and the association to which they belong, *fn3" as counterdefendants, alleging, inter alia, *fn4" that these counterdefendants conspired at a series of meetings to fix the resale price of the Inquirer in violation of Section 1 of the Sherman Act. Although Triangle is not seeking injunctive and treble damage relief at this stage, evidence on this issue has bearing upon whether plaintiffs have come into equity with 'unclean hands.' Triangle also has moved to dismiss plaintiffs' complaint for failure to state a cause of action.

 My findings of fact for the purposes of this preliminary injunction are as follows: *fn5"

 The Inquirer, which is published in Philadelphia, is a morning newspaper carrying national and world-wide news and has a circulation of over 500,000 daily copies and over 900,000 Sunday copies. Its circulation includes substantial numbers of copies distributed in the states of New Jersey, Delaware, Maryland and the District of Columbia. Triangle has approximately 250 suburban newsdealers distributing Inquirers in Bucks, Chester, Delaware and Montgomery Counties in Pennsylvania, and Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Mercer and Salem Counties in New Jersey, and Newcastle County in the state of Delaware.

 Plaintiffs, John and Warren Graham, are partners in a news route in the Villanova-Rosemont area of suburban Philadelphia where they delivered newspapers to home subscribers and stores. Plaintiffs served 900 Inquirers daily and approximately 100 New York papers, including the New York Times and Herald Tribune. In delivering newspapers, plaintiffs used two trucks and various tying and wrapping equipment which they own. In addition to the work done by themselves they had one full-time employee to assist them. *fn6" They operate from plaintiff John Graham's home. Under the arrangement that plaintiffs and many other newsdealers had with Triangle, they purchased newspapers for resale from the defendant and were permitted to return the newspapers they did not sell and receive credit for them. Plaintiffs charged a weekly service fee ranging from ten cents to fifty cents per customer, with an average of approximately twenty cents, depending upon the amount of service required by the individual account. *fn7" It is this service charge which is the subject of the present controversy.

 At least as early as February 1958, the imposition of service charges by carriers was a matter of concern to Triangle. At that time Triangle's policy was to require new carriers to sign an agreement on a form supplied by it stating that they would not charge a price for the paper in excess of that established by Triangle. This policy was discontinued shortly afterwards, and instead, Triangle went 'along with (a) five cents a week delivery charge on the daily papers * * *' *fn8" until September 30, 1963, when it raised the daily Inquirer from five to eight cents a copy. *fn9"

 The retail price increase to eight cents was accompanied by notices to all of Triangle's carriers stating:

 'The daily home delivery price * * * becomes 48 cents per week [for six dailys a week]. Under this price structure, we will not supply the newspaper for resale by any carrier who adds a service charge to that figure.' *fn10"

 These notices were followed by periodic statements in the masthead of the Inquirer that the daily home delivered rate is 48 cents per week.

 After the notices to discontinue service charges were sent to the carriers, the enforcement policy of Triangle, as stated by Morris J. Schiffman, Circulation Director of the Inquirer, was that no action was to be taken against noncomplying carriers unless a complaint was made by one of the subscribers on his route. When a complaint was received, the carrier was then told by Mr. Schiffman, or one of his subordinates, that he would be 'cut off' unless he submitted a written statement that he would eliminate the service charge. However, Triangle took no independent action to ascertain whether service charges were being imposed by the carriers.

 In response to demands by representatives of Triangle, at least seven carriers gave such statements after being told that their supply of Inquirers would be discontinued. *fn11"

 Around the same time as Triangle announced its policy on service charges, a group of suburban carriers began meeting on a regular basis under the auspices of an organization known as the Delaware Valley News Dealers' Association. The first meeting was held in New Jersey at which plaintiff, John Graham, director and treasurer of the Association, spoke and at which Robert E. Davidson, one of the counterdefendants, presided. There were about seven of these meetings which were attended by as many as fifty carriers, some of whom were from New Jersey. One of the major -- although not sole -- subjects of discussion at these meetings was service charges.

 Plaintiff, John Graham, testified that the carriers, including himself as an active leader of the Association, agreed at these meetings that where they previously imposed a service charge, they would continue to make such charge. The suburban carriers also raised a legal fund of $ 6500 at these meetings to assist the first man whose supply of Inquirers was discontinued.

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