Specialty Tires Of America Llc. v. Hoosier Racing Tire Corp.

• Decision Date: 23 July 2010
• Docket Number: No. 09-3989.,09-3989.
• Parties: RACE TIRES AMERICA, INC., a Division of Specialty Tires of America, Inc.; Specialty Tires of America, Inc.; Specialty Tires of America (Pennsylvania), Inc.; Specialty Tires of America (Tennessee), LLC, Appellants v. HOOSIER RACING TIRE CORP; Dirt Motor Sports Inc, d/b/a World Racing Group.
• Court: U.S. Court of Appeals — Third Circuit

614 F.3d 57

RACE TIRES AMERICA, INC., a Division of Specialty Tires of America, Inc.; Specialty Tires of America, Inc.; Specialty Tires of America (Pennsylvania), Inc.; Specialty Tires of America (Tennessee), LLC, Appellants

v.HOOSIER RACING TIRE CORP; Dirt Motor Sports Inc, d/b/a World Racing Group.

No. 09-3989.

United States Court of Appeals,Third Circuit.

Argued April 14, 2010.

Filed July 23, 2010.

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Mark K. Dausch, Esq., Joseph Decker, Esq. (Argued), Alan B. Rosenthal, Esq., Mark D. Shepard, Esq., Babst, Calland, Clements & Zomnir, Pittsburgh, PA, Thomas M. Schultz, Esq., Polymer Enterprises, Greensburg, PA, for Appellants.

Reed Smith, Pittsburgh, PA, Donald E. Knebel, Esq. (Argued), Kendall Millard, Esq., Deborah E. Pollack-Milgate, Esq., Aaron M. Staser, Esq., Barnes and Thornburg, Indianapolis, IN, for Appellee Hoosier Racing Tire Corp.

John R. Gotaskie, Jr., Esq., Fox Rothschild, Pittsburgh, PA, Theodore H. Jobes, Esq. (Argued), Christine Soares, Esq., Fox Rothschild, Philadelphia, PA, for Appellee Dirt Motor Sports, Inc., d/b/a World Racing Group.

Helen M. Maher, Esq., Boies, Schiller & Flexner, Armonk, NY, for Amicus-Curiae Grand-Am Road Racing and National Association for Stock Car Auto Racing, Inc.

Robert W. Powell, Esq., Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, MI, for Amicus-Curiae United States Auto Club, Inc.

Before FISHER, and COWEN, Circuit Judges and DITTER ^* , District Judge.

OPINION

COWEN, Circuit Judge.

The Plaintiff in this antitrust matter, a tire supplier, appeals from the order of the United States District Court for the Western District of Pennsylvania granting the respective motions for summary judgment filed by the Defendants, a tire supplier competitor and a motorsports sanctioning body. Plaintiff's claims arise out of the adoption of the so-called “single tire rule” by various sanctioning bodies in the sport of dirt oval track racing as well as the related exclusive supply contracts between these sanctioning bodies and the Defendant tire supplier. Plaintiff further challenges the District Court's denial of its motion for leave to amend its complaint. We will affirm.

I.

A. The Parties

We refer to the four companies listed as the Plaintiffs in the current matter by the name of the parent company, “STA.” ¹ STA manufactures and sells specialty tires for a variety of vehicles, such as aircraft, farming equipment, and racing cars. It specifically manufactures and sells a “house brand” known as “American Racer.” This American Racer line includes dirt track racing tires, asphalt track racing tires, ATV (“all terrain vehicle”) racing tires, passenger performance tires, and race track equipment tires. Defendant Hoosier Racing Tire Corp. (“Hoosier”) is a family-owned business, which focuses almost exclusively on the racing tire business (in contrast to STA, which sells a large variety of different kinds of specialty tires and is owned by a holding company named Polymer Enterprises, Inc.). Hoosier is the largest race tire manufacturer in the world that specializes in manufacturing racing tires.

STA, Hoosier, and the Goodyear Tire and Rubber Co. (“Goodyear”) represent the three major competitors in the alleged market of tires for dirt oval track racing in the United States and Canada. There were at least five competitors in this market in the 1980s and the 1990s, namely, STA, which was previously known as McCreary, Hoosier, Goodyear, Firestone, and M & H.

The evidence in the record indicates that Hoosier's market share in the dirt oval track market grew from 59.6% in 1998 to 65% in 2000. In terms of sales revenue, Hoosier's market share for dirt track racing tires increased from 69% in 2003 to 79% in 2007. For dirt sprint car tires, Hoosier's market share increased from 87% in 2003 to 94% in 2007. On the other hand, STA's share of the dirt tire market dropped from 29% to 19% between 2003 and 2007, while Goodyear's share remained the same at approximately 2%. STA's dirt sprint tire share likewise fell from 10% in 2003 to 5% in 2007, and Goodyear's share similarly went from 3% in 2003 to 1% in 2007.

Defendant Dirt Motor Sports, Inc. d/b/a World Racing Group (“DMS”) is a motorsports sanctioning body. As explained in more detail in Section I.B, infra, DMS and the other sanctioning bodies organize and promote races and, in turn, promulgate rules governing these races. DMS, in particular, owns such well-known touring series as the “World of Outlaw Sprint Car Series” and the “Late Model Series.” It sanctions over 5,000 races per year at over 200 dirt oval tracks in twenty-one states.

In 2005, DMS acquired another sanctioning body known as United Midwest Promoters (“UMP”). There are two other major sanctioning companies in the field of dirt oval track racing: (1) Amicus International Motor Contest Association (“IMCA”) (sanctioning races at approximately 112 dirt oval tracks); and (2) WISSOTA Promotions, Inc. (“WISSOTA”) (sanctioning races at approximately fifty-seven dirt oval tracks). Combined, DMS, IMCA, and WISSOTA sanction modified, late model, sprint, or stock car races at over 70% of the 636 weekly tracks in the United States.

B. The Role of Sanctioning Bodies and the “Single Tire Rule”

As the District Court recognized, the role played by sanctioning bodies in dirt oval track racing (and, in fact, in motorsports racing in general) is of special importance here. Track owners or promoters typically belong to a sanctioning body, which charges sanctioning fees in exchange for this privilege of membership. These bodies sanction races, and they formulate rules for such races. These sanctioning bodies (like the track owners and promoters) compete to attract car owners (generally known as “racers”), drivers, and fans to their respective races. Accordingly, the sanctioning bodies create various incentives in order to get the most racers, drivers, and fans.

The record reveals that these sanctioning bodies often choose to adopt a “single tire rule.” Such a rule generally requires that a specific tire type and brand be used on one or more wheel positions for one or more classes of cars for a series of races or racing seasons.

Significantly, the sanctioning bodies generally do not buy the tires themselves, and the tires are purchased by the participating racers and drivers. The organizations instead establish the tire parameters and requirements for the race. Some rules may define the permissible tire by merely a bead size or some other physical dimension. Other rules may require that the tires at one or more wheel locations be a particular type or brand. Tire rules that do not require a specific brand of tire are generally called “open tire rules.”

Tires are not the only components of a race car subject to a single source or manufacturer rule. Sanctioning bodies make rules that may specify the appropriate carburetors, mufflers, chassis, or other kinds of equipment to be used. For example, Amicus United States Auto Club, Inc. (“USAC”) has a “spec engine rule” for its Ford Focus Midget Series, which requires the use of Ford engines. United Racing Club (“URC”) has a rule requiring a single brand of cylinder heads, manufactured by the sanctioning body's sponsor. The International Race of Champions Series mandates that the drivers actually use identical cars. Regardless of the kind of equipment at issue, the record indicates that a sanctioning body makes these fundamental determinations based on an assessment of its own self-interest.

C. Single Tire Rules and Exclusive Agreements

Evidence in the record further demonstrates that STA has, at least in the past, supported the single tire rule. In fact, its own website takes credit for the concept itself, stating that:

In the 1970's [sic], Joe Jacobs, the developer of the race tire business that eventually became Race Tires America, proposed and encouraged race tracks and promoters to adopt spec tire or track tire rules. Under this concept, track owners and promoters adopted a manufacturer's tire for a particular class of races for the duration of a racing season.

The purpose of the rule was to avoid the almost constant pace of tire changes that were particularly costly to racers, and to encourage racer parity by removing the “ ‘hot’ ” tire setups. With all racers competing on a single tire design and compound, the tire wars would be quelled and race results would be more related to a driver's skill and ability and not a more expensive “ ‘state-of-the-art’ ” tire. The acceptance of spec tire rules contributed to the success and popularity of dirt track racing in America.

(A484.) STA's website goes on to attack the abuse of such “spec tire rules,” claiming that such abuse has resulted, inter alia, in the concentration of market power in the hands of a single monopolistic tire supplier, the loss of true competition between the few remaining tire suppliers, and harm to STA, other suppliers, track owners, promoters, and the drivers themselves. In this litigation, STA attempts to distinguish its prior support for the single tire rule by claiming that it merely promoted the adoption of a track rule that would remain in effect for a single racing season, in contrast to Hoosier's practice of entering into a series of exclusive supply contracts with major sanctioning bodies that, in turn, encompass thousands of races and last for periods of up to seven years.

In fact, the above statement from the website actually comes from a proposal by STA for a “Declaration in Favor of Competition.” The accompanying petition or “Declaration” expressly calls for: (1) the establishment of track tire rules based on various objective criteria; (2) the prohibition of “any rule, policy, or practice mandating or providing for the use of a single manufacturer's tire;” (3) the creation of “non-discriminatory compensation rates” to offset “the cost of driver point funds and...