552 F.2d 646 (5th Cir. 1977), 76-2199, Hatley v. American Quarter Horse Ass'n

Docket Nº:76-2199.
Citation:552 F.2d 646
Party Name:Melvin E. HATLEY, Plaintiff-Appellee Cross-Appellant, v. The AMERICAN QUARTER HORSE ASSOCIATION et al., Defendants-Appellants Cross-Appellees.
Case Date:May 19, 1977
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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552 F.2d 646 (5th Cir. 1977)

Melvin E. HATLEY, Plaintiff-Appellee Cross-Appellant,

v.

The AMERICAN QUARTER HORSE ASSOCIATION et al.,

Defendants-Appellants Cross-Appellees.

No. 76-2199.

United States Court of Appeals, Fifth Circuit

May 19, 1977

Page 647

[Copyrighted Material Omitted]

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R. A. Wilson, D. Barry Stone, Amarillo, Tex., for defendants-appellants cross-appellees.

Norman Darwin, Fort Worth, Tex., amicus curiae, for American Paint Horse Assoc.

Michael Paul Kirschner, Oklahoma City, Okl., A. B. Hankins, Amarillo, Tex., for plaintiff-appellee cross-appellant.

Appeals from the United States District Court for the Northern District of Texas.

Before COLEMAN, AINSWORTH and INGRAHAM, Circuit Judges.

INGRAHAM, Circuit Judge:

Melvin E. Hatley owned some magnificent horseflesh, including a stallion named Mr. Jet Moore and a mare named Chickamona. Both animals were registered with the American Quarter Horse Association (AQHA or "the Association"). 1 Although Mr. Jet Moore died after only one season at stud, he sired numerous foals, including a 1974 colt out of Chickamona. Hatley applied to the AQHA for registration of the colt under the name Naturally High. The Association refused to register the colt, citing excessive white markings which indicated that the colt was a paint horse rather than a quarter horse. Hatley's suit for antitrust violations followed. 2 The suit was transferred under 28 U.S.C. § 1404(a) 3 from the Western District of Oklahoma to the Northern District of Texas. Hatley thereupon appended a Texas law due process claim to the complaint. Trial to the court resulted in judgment for defendants 4 on

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the antitrust claim. Although he lost the antitrust battle for attorney's fees, plaintiff prevailed in the registration war on the Texas due process issue. The district court ruled for plaintiff because the AQHA afforded no hearing on the question of "excessive" white markings. Defendants were enjoined from refusing to register Naturally High. Both parties appealed the adverse portions of the decision. We affirm on the antitrust claim but reverse and remand in part on the Texas due process claim.

The quarter horse is a popular breed in the United States. It is distinguished from other horses by performance, conformation and coloring. This type is renowned for speed over short distances such as the quarter mile, hence its name. The quarter horse is generally a solid color except for occasional white on the lower legs and part of the face. 5 Aficionados have sought to promote the breed and, not incidentally, to profit therefrom. Races and shows offer lucrative prize money. Selective breeding has become an art and a science. Champion stallions command high stud fees and successful mares are prized by stables.

Mr. Jet Moore was a champion. He won over $340,000 in racing purses and in 1972 was named World Champion Running Horse by the AQHA. Chickamona won $110,000 in racing purses. In an industry where pedigree is carefully scrutinized, it is significant that both horses had ancestors whose records were outstanding.

The AQHA is a non-profit Texas corporation. Its by-laws proclaim that:

"The purpose of this Association shall be to collect, record, and preserve the pedigrees of Quarter Horses, to publish a Stud Book and registry, and to stimulate and regulate any and all other matters such as may pertain to the history, breeding, exhibition, publicity, sale, racing or improvements of this breed."

Official Handbook of the American Quarter Horse Association, Corporation By-Laws, Article I, Section 2. In the thirty-seven years since its creation the Association has been fantastically successful. It has registered over a million quarter horses and has over 50,000 members. Some horses and members are found in all fifty states. The AQHA publishes the Quarter Horse Journal, which keeps members informed of developments in the industry, including the results of AQHA-approved quarter horse shows and membership information such as suspension, expulsions and refusals of admission. Registered quarter horses, equipment, money and AQHA members cross interstate boundaries for the purpose of engaging in the business. The AQHA has ascended to such prominence that:

"Persons organizing shows and rodeos find it necessary to restrict participation to animals on the register of AQHA and to restrict entitlement to show or judge animals shown by others at these shows and rodeos to individuals who have been admitted to membership and are in good standing as a member of AQHA."

American Quarter Horse Association v. Rose, 525 S.W.2d 227, 228 (Tex.Civ.App. Ft. Worth 1975, no writ).

Registration is usually a simple process. The record owner of the foal's dam submits an application, a breeder's certificate and a registration fee. Because coloring and markings aid in distinguishing the quarter horse from less popular breeds, the application provides for a pictorial description of the horse. However, it is sometimes difficult to say precisely where the quarter horse ends and the paint horse begins. The AQHA has had a "white rule" since its creation. This rule codifies the distinction

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between the quarter horse and other members of the equine family. From 1972 through 1975 the white rule (hereinafter styled Rule 92) read as follows:

92. A. No animal having white markings with underlying light skin beyond the following described lines shall be eligible for registration in any section of the Association's official Stud Book. The prescribed lines for white markings with underlying light skin are as follows:

1. White above a line around each leg at the center of the knees and point of the hocks.

2. White behind a line running from the center of each ear to the corner of each side of the mouth; and

3. White on the lower lip above a line running from one corner of the mouth to the other corner. A diagram of these lines of demarcation is shown on page 29.

  1. When an animal is a gelding or spayed mare, it may be eligible for registration, having white markings with underlying light skin beyond the lines described in paragraph "A" above, but not constituting excessive white markings with underlying light skin, or having one or more spots of such size, kind, and in such location as to indicate pinto, appaloosa or albino breeding. The registration application for such animal shall be accompanied by a statement from the owner stating such condition of the animal and the date on which the animal was gelded or spayed.

  2. In cases of undue hardship, in addition to the provisions of paragraphs A and B above, the Executive Committee shall have the authority to declare eligible for registration a stallion or mare which, in the majority of opinion, is outstanding in conformation and having a sire or dam of outstanding performance or produce, and is worthy of registration though having white markings with underlying light skin beyond the lines described in paragraph A above, but within the standards specified in paragraph B above. An owner who feels he has a just hardship case shall make application and tender a fee of $200 for the purpose of sending two regular field inspectors to examine the horse. The $200 fee shall not be returned regardless of the decision of the Executive Committee. The inspectors' opinions shall be considered by the Executive Committee in acting on the application.

  3. When a registration application shows the animal to be registered has white markings beyond the prescribed lines; excessive white markings; or white spot or spots, pictures of the animal shall be required and the animal may be inspected before eligibility of the animal is determined and the application is processed.

  4. The registration certificate of any animal having white markings beyond the prescribed lines; excessive white markings, or spot shall be subject to cancellation where the registration application fails to indicate or misrepresents the animal's actual markings.

See Fig. 1. In 1976 the fee for hardship applications was increased to $250. The hardship provision (92C) was added in 1972. Prior to that time horses with white markings beyond the knees, hocks and the boundaries on the face could be registered only if neutered (see 92B). The hardship provision provided an alternative.

Rule 92 is aimed not at the total amount of white markings on the body of the animal, but at the amount of white markings beyond specified areas on the body. Thus, a horse with a few white spots on its flank and a solid chestnut color elsewhere might be denied quarter horse registration while a horse with solid white markings below the knees and hocks would be registered, even though the latter had more square inches of white overall. The word "excessive" is found in both paragraphs 92B and 92C. We agree with the trial court that this word means the same thing in both paragraphs. We emphasize that white markings beyond the boundaries on face and legs (as set out in 92A) are not necessarily "excessive" under 92B and 92C. The AQHA has registered

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many horses with white beyond those lines.

When applications for registration arrived at the AQHA office, they were first considered by the Registration Department. If it appeared from the pictorial sketch that the horse had white markings beyond the prescribed areas on the face and legs, the Department requested photographs. After examining the photos, the Office Committee, at the direction of the Executive Committee, would determine which of three reply letters to send to the applicant. The "A" letter informed the applicant that the horse could not be registered even if gelded or spayed because it had excessive white beyond the boundaries established by Rule 92. The "B" letter noted that registration might be allowed if...

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