Volvo North America Corp. v. Men's Intern. Professional Tennis Council
| Decision Date | 30 August 1988 |
| Docket Number | Nos. 1201,s. 1201 |
| Citation | 857 F.2d 55 |
| Parties | 1988-2 Trade Cases 68,210 VOLVO NORTH AMERICA CORPORATION, International Merchandising Corporation, and ProServ, Inc., Plaintiffs-Appellants, v. MEN'S INTERNATIONAL PROFESSIONAL TENNIS COUNCIL, M. Marshall Happer, III, and Philippe Chatrier, Defendants-Appellees. MEN'S INTERNATIONAL PROFESSIONAL TENNIS COUNCIL and M. Marshall Happer, III, Counterclaimants, v. VOLVO NORTH AMERICA CORPORATION, International Merchandising Corporation, and ProServ, Inc., Counterclaim-Defendants, v. Donald L. DELL, Raymond S. Benton, Dell, Benton & Falk, Mark H. McCormack, International Merchandising Group, International Management Inc., Transworld International Inc., and A.B. Volvo, Additional Counterclaim-Defendants. to 1203, Dockets 87-7776, 87-7778 and 87-7784. |
| Court | U.S. Court of Appeals — Second Circuit |
James J. Maloney, New York City (Michael F. Coyne, Donald P. Alexander, Nancy A. Brown, James C. Oschal, Rogers & Wells, New York City, of counsel), for plaintiff-appellant Volvo North America Corp.
Robert S. Litt, Washington, D.C. (Steven R. Kuney, Mark S. Levinstein, William R. Murray, Jr., Glenn J. Pfadenhauer, Williams & Connolly, Washington, D.C., of counsel), for plaintiff-appellant ProServ, Inc.
Lloyd I. Isler, New York City (Lloyd I. Isler, P.C., New York City, of counsel), for plaintiff-appellant International Merchandising Corp.
Charles E. Koob, New York City (Roy L. Reardon, Michael J. Chepiga, Mary Elizabeth McGarry, Jay S. Handlin, Jodi S. Balsam, Simpson Thacher & Bartlett, New York City, of counsel), for defendants-appellees.
Before KAUFMAN, PIERCE, and ALTIMARI, Circuit Judges.
This is an appeal from so much of an order entered in the United States District Court for the Southern District of New York, Kevin Thomas Duffy, Judge, as dismissed Counts One through Seven of an amended complaint filed by appellants Volvo North America Corporation ("Volvo"), International Merchandising Corporation ("IMC"), and ProServ, Inc. ("ProServ"), for failure to state a claim upon which relief can be granted. See Volvo N. Am. Corp. v. Men's Int'l Professional Tennis Council, 678 F.Supp. 1035 (S.D.N.Y.1987), appeal dismissed in part, 839 F.2d 69 (2d Cir.1988). Counts One through Five allege that appellees, the Men's International Professional Tennis Council ("MIPTC"), its chairman, Philippe Chatrier, and its administrator, M. Marshall Happer, III, have conspired in violation of Secs. 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1, 2 (1982), to monopolize and restrain trade in the markets for the production of men's professional tennis events, the tennis-playing services of men's professional tennis players, and the rights to broadcast men's professional tennis events. Counts Six and Seven allege pendent state law claims for tortious interference with prospective business relations and unfair competition. For the reasons stated below, we vacate the dismissal of certain of appellants' antitrust and common law claims and remand with instructions to dismiss these claims with leave to replead; and we reverse as to the remaining claims on appeal.
According to the amended complaint, the production of a men's professional tennis event requires: (1) selecting a site and arranging for a suitable facility for the event; (2) marketing the event; and (3) raising revenue to cover the costs of the event through the sale of sponsorship rights, the sale of tickets to attend the event, the sale of concessions, programs, or other products At the present time, men's professional tennis events fall into one of two categories. The first category consists of events that are sanctioned by either MIPTC or the International Tennis Federation ("ITF"). These events include the Davis Cup events and the "Grand Prix" events; the latter consist of (1) the four "Grand Slam" tournaments, that is, Wimbledon, the U.S. Open, the French Open, and the Australian Open; (2) the Masters Tournament; (3) the World Championship Tennis Finals; (4) "Super Series" events; (5) "Regular Series" events; and (6) "Open Week Series" events. The second category consists of tournaments known as "Special Events," which include all events other than MIPTC- or ITF-sanctioned events and the Davis Cup events. Until recently, Volvo owned, produced, and sponsored only sanctioned events; IMC and ProServ, on the other hand, have owned and produced both sanctioned events and Special Events. 1
at the event, and the sale of rights associated with the event, including the rights to broadcast the event on television. The production of a men's professional tennis event often involves several different participants. The "owner" of the event is the person or entity that is obligated to pay the expenses of the event, including compensation to the players and the costs for the facility or site where the event is played, and that is entitled to receive the revenues generated by the event. Frequently, the owner of an event will contract with a third person, such as a player-agent, to advertise or market the event or certain rights associated with the event, or to manage the day-to-day operation of the event. An event also may have several different "sponsors," including: (a) a title sponsor, which purchases the right to have its name included in the title of the event; (b) a presenting sponsor, which purchases the right to have the event identified and advertised as an event that is "presented by" this sponsor; and (c) secondary sponsors, which pay for specific subsidiary sponsorship rights, such as the right to have the sponsor's product identified as the official product of the event. Volvo is an owner, producer, and sponsor of certain men's professional tennis events. IMC and ProServ own and produce certain tennis events, and also provide representational and management services to men's professional tennis players.
The amended complaint alleges that, up until the late 1960's, only amateur tennis players were allowed to compete in the prestigious men's tennis tournaments sanctioned by ITF, a governing body that consists of various national tennis associations, including the United States Tennis Association. In the late 1960's, however, a rival organization, World Championship Tennis, Inc. ("WCT"), began sponsoring a series of men's professional tennis tournaments to compete with the events sanctioned by ITF. A substantial number of top men's tennis players thereafter turned professional and began to participate in WCT-sponsored events. In response, ITF eventually changed its rules to permit professional players to compete in ITF-sanctioned tournaments. In 1974 ITF joined in establishing MIPTC, which currently consists of nine members: three members representing ITF; three members representing men's professional tennis players; and three members representing men's professional tennis tournament directors. As noted above, MIPTC sanctions and schedules the tournaments that comprise the Grand Prix.
From 1974 to 1981, MIPTC increased the number of its Grand Prix events from fifty to ninety. At the same time, MIPTC began to require men's professional tennis players, as a condition of their participation in any Grand Prix event, to execute "Commitment Agreements" which required the players to participate in a minimum number of Grand Prix events, and to limit their
participation in events not sanctioned by MIPTC. As a result, WCT agreed to obtain MIPTC sanctions for its entire circuit of events. By 1981, WCT owned eight Grand Prix events sanctioned by MIPTC.
In 1981, a dispute arose between MIPTC and WCT over the terms and conditions of WCT's continued participation in the Grand Prix. WCT withdrew from the Grand Prix in April, 1981, and unsuccessfully attempted to establish its own independent tennis circuit for 1982. WCT thereafter commenced an action in the United States District Court for the Southern District of New York, alleging that MIPTC, ITF, and the Association of Tennis Professionals had violated the antitrust laws by engaging in a combination to monopolize the production and presentation of championship caliber men's professional tennis throughout the world. The lawsuit was settled in the fall of 1983, and WCT events were integrated into the Grand Prix. The resulting agreement (the "MIPTC-WCT Agreement") provided, inter alia, that: (1) MIPTC would sanction a specified minimum number of WCT tournaments; (2) MIPTC would give the WCT tournaments scheduling and sanctioning protection and priority; (3) WCT would not sponsor, own, or promote any Special Event or Grand Prix event that might adversely affect another Grand Prix event without prior MIPTC approval; (4) if certain conditions were satisfied, WCT would terminate its involvement in the business of acting as an agent or representative of men's professional tennis players; (5) if WCT decided to operate its WCT Tournament of Champions or its WCT World Doubles Championship as Special Events, MIPTC would (a) exempt these events from all Special Event restrictions, (b) continue to grant these events scheduling priority, and (c) exempt all players from any rules that would restrict their participation in these events; (6) MIPTC would limit the number of events it would sanction; (7) MIPTC would alter the players' Commitment Agreements to require all players who qualified to participate in the WCT Finals; (8) MIPTC would increase the minimum number of MIPTC-sanctioned events in which players would be required to participate; (9) MIPTC would use its power over the services of men's professional tennis players to encourage players to participate in both WCT and other MIPTC events; (10) MIPTC and WCT would fix minimum and maximum levels of compensation to be offered to players at WCT events;...
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