US Trotting Ass'n v. Chicago Downs Ass'n, Inc.

• Decision Date: 18 March 1980
• Docket Number: No. 77 C 3312,77 C 3313 and 78 C 1258.,77 C 3312
• Citation: 487 F. Supp. 1008
• Parties: The UNITED STATES TROTTING ASSOCIATION, an Ohio non-profit corporation, Plaintiff, v. CHICAGO DOWNS ASSOCIATION, INC., an Illinois Corporation, Defendant. The UNITED STATES TROTTING ASSOCIATION, an Ohio non-profit corporation, Plaintiff, v. FOX VALLEY TROTTING CLUB, INC., an Illinois Corporation, Defendant (two cases).
• Court: U.S. District Court — Northern District of Illinois

487 F. Supp. 1008

The UNITED STATES TROTTING ASSOCIATION, an Ohio non-profit corporation, Plaintiff, v. CHICAGO DOWNS ASSOCIATION, INC., an Illinois Corporation, Defendant.

The UNITED STATES TROTTING ASSOCIATION, an Ohio non-profit corporation, Plaintiff, v. FOX VALLEY TROTTING CLUB, INC., an Illinois Corporation, Defendant (two cases).

Nos. 77 C 3312, 77 C 3313 and 78 C 1258.

United States District Court, N. D. Illinois, E. D.

March 18, 1980.

Donald A. O'Brien, James W. Hathaway, Arnold Kanter, Burditt & Calkins, Chicago, Ill., A. Vernon Carnahan, Donovan, Leisure, Newton & Irvine, New York City, for plaintiffs.

Thomas D. Nash, Jr., Robert M. Ahern, Nash, Ahern & McNally, Chicago, Ill., Dominic H. Frinzi, Stillo & Demeo, Milwaukee, Wis., Thomas P. Sullivan, U. S. Atty., Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

United States Trotting Association (USTA) has brought these actions seeking injunctive relief, an accounting, and punitive damages against defendant race tracks Fox Valley Trotting Club, Inc. ("Fox Valley") and Chicago Downs Association, Inc. ("Chicago Downs") for alleged misappropriation of USTA's property.¹ The defendants have counterclaimed for injunctive relief against USTA for its alleged involvement in a group boycott in violation of the Sherman Act, 15 U.S.C. § 1. In addition, defendants have alleged that USTA has committed the common law offense of tortious interference with the contractual relationships existing between the defendant race tracks and harness-racing horsemen.²

The relevant facts are as follows. USTA, an Ohio not-for-profit organization incorporated in 1939, is involved in the sport of harness racing. USTA's activities include the issuance of two certificates to the owners of harness racing horses. The registration certificate issued by USTA documents that a particular horse has been registered with the organization. The face of the certificate contains information concerning the animal's physical markings, pedigree, owner, and breeder. Subsequent sales of the horse are recorded on the reverse side of the certificate. At the time of sale, the new owner signs the registration certificate and then sends it to USTA. There, the USTA Registrar records the transfer, signs the certificate, and returns it to the new owner, who retains possession thereof.

USTA also issues an annual eligibility certificate. This certificate records pertinent performance information compiled from the horse's last eight starts in the prior racing season. This information is obtained by the USTA from the "Judges Book," which is a record maintained by USTA-licensed employees of the various race tracks. During the harness racing season, owners who wish to enter horses in races at a particular track must present the eligibility certificate — as well as the registration certificate — to the clerk of the course. At the conclusion of the race, the clerk records on the eligibility certificate the horse's performance in each race it has entered.³ As the horse travels from track to track throughout the racing season, track officials utilize the information on the eligibility certificates to determine whether the horse first must run a qualifying race in order to compete in a purse race and whether it is competitive with the others in the field. The horse's performance in its previous race is determined from the eligibility certificate and the accuracy of the information contained in the track's racing programs sold to the public is verified from the certificate. The eligibility certificate remains in the possession of the owner throughout the season. Moreover, the compilation of information during the racing season is done by employees of the respective tracks, not by USTA officials. Thus, USTA has no direct knowledge of what has been recorded on those certificates by the respective tracks. When the certificate expires at the conclusion of the racing season, the owner does not return it to USTA.⁴ It is generally destroyed.

In 1939, the time of USTA's inception, Illinois maintained no state scheme for the regulation of harness racing. As a result, USTA assumed extensive control over virtually all aspects of the sport. In 1945, however, the State of Illinois enacted legislation regulating harness racing. As a result, pari-mutuel betting on harness racing in Illinois has blossomed into a substantial business, as well as a significant source of tax revenues.⁵ The state has recognized the need to maintain integrity in the conduct of harness racing through the enactment of an elaborate statutory scheme.⁶ Moreover, the state has enlisted USTA as a partner in the regulation of harness racing. State law requires that harness race horses be registered with USTA.⁷ The rules of the Illinois Racing Board — a state administrative agency⁸ — also require that all horses which enter harness races possess a USTA eligibility certificate.⁹ Thus, through these record-keeping functions, USTA continues to perform an integral role in ensuring the integrity of harness racing.

There is no state statute or regulation which requires that horse owners or race tracks obtain membership in USTA; the state merely mandates that harness racing horses possess USTA registration and eligibility certificates. USTA rules, however, provide that only owners who are members of USTA may obtain registration and eligibility certificates for their horses.¹⁰ In addition, USTA rules prohibit organization members from racing horses at tracks which neither belong to USTA nor have entered into a services contract with the organization.¹¹ Members who violate this prohibition are subject to having their eligibility certificates revoked, and may be precluded from obtaining certificates for future racing seasons.¹² USTA rules also provide for a $100 fine against USTA-member harness racing drivers who run horses at non-affiliated tracks.¹³ Membership in or contractual affiliation with USTA, therefore, is a practical necessity if race tracks are to have USTA-sanctioned horses run at their tracks.

It is this latter requirement that gives rise to the instant litigation. Chicago Downs and Fox Valley both are tracks licensed by the Illinois Racing Board to conduct harness racing meets. During the 1975 and 1977 seasons,¹⁴ both tracks declined membership in or affiliation with USTA on the ground that the services provided were not commensurate with the fees charged.¹⁵ Nonetheless, these tracks continued to hold races with USTA-registered horses, and continued to utilize the information contained on the registration and eligibility certificates. The tracks also provided USTA with the required information concerning each horse's performance in the races entered.

On July 1 and July 8, 1977, USTA in correspondence with its members indicated its intent to enforce strictly the USTA sanctions for participation at unaffiliated tracks. Specifically, USTA stated that it would enforce the sanctions against members who participated in the racing season at Fox Valley scheduled to begin September 3, 1977, unless Fox Valley by that time had obtained USTA affiliation. Shortly thereafter, USTA instituted the three instant legal actions.

In 77 C 3312, USTA alleges that Chicago Downs' use of the certificates during three harness racing seasons in 1975 and 1977 constitute misappropriation of USTA property. In 77 C 3313, USTA makes the same allegation against Fox Valley with respect to two racing seasons in 1975 and 1977. USTA filed 78 C 1258 against Fox Valley in an attempt to restrain it from using the certificates in the races scheduled for the 1978 season. In all three actions, the defendant tracks have filed counterclaims alleging antitrust violations and tortious interference with the contract between the horsemen and the tracks.¹⁶ On defendants' motion, a preliminary injunction has issued prohibiting USTA from enforcing its sanctions against members who would participate in races at Chicago Downs and Fox Valley. As a condition of this preliminary relief, Fox Valley has deposited $23,100 with the Court to cover its potential ultimate liability to USTA; Chicago Downs has $33,970 on deposit.¹⁷

The parties have filed motions under Fed. R.Civ.P. 56 for summary judgment on all issues raised in the pleadings. Inasmuch as the parties concede — and the record reflects — that there are no material factual issues remaining in dispute, the action is ripe for summary adjudication. See Cedillo v. International Association of Bridge & Structural Iron Workers, Local Union No. 1, 603 F.2d 7, 10-11 (7th Cir. 1979).

I. MISAPPROPRIATION

An essential predicate of USTA's misappropriation claim is proof of its ownership of the certificates in question; or, more precisely, the information contained on those certificates. Ordinarily, possession follows ownership. I.L.P. Property § 7 at 286. Here, it is undisputed that the horse owners retain possession of the certificates once they are issued by USTA. This is prima facie evidence of ownership of the certificates by the horse owners. Mori v. Chicago National Bank, 3 Ill.App.2d 49, 120 N.E.2d 567 (1st Dist. 1954).

USTA offers two arguments in rebuttal. First, USTA notes that owners do not have unfettered control over the use of the certificates. There are penalties imposed upon owners who fail to report sales of horses to USTA and who submit false information concerning registration documents. Moreover, if USTA determines that information on an outstanding registration is incorrect, that registration may be cancelled. Second, USTA submits that the importance of the registration certificate to the USTA scheme of record-keeping is strong evidence of its ownership interest in that certificate. Thus, USTA argues that the owners' possession of the registration certificate appropriately might be viewed as a bailment or agency, since the owners are the logical carriers of the records pertaining to the horses the...