M & H Tire Co., Inc. v. Hoosier Racing Tire Corp.

• Decision Date: 29 March 1983
• Docket Number: Civ. A. No. 82-0697-C.
• Citation: 560 F. Supp. 591
• Court: U.S. District Court — District of Massachusetts
• Parties: M & H TIRE COMPANY, INC., Plaintiff, v. HOOSIER RACING TIRE CORPORATION, et al., Defendants.

560 F. Supp. 591

M & H TIRE COMPANY, INC., Plaintiff, v. HOOSIER RACING TIRE CORPORATION, et al., Defendants.

Civ. A. No. 82-0697-C.

United States District Court, D. Massachusetts.

March 29, 1983.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Gael Mahony, Hill & Barlow, Timothy J. Dacey, III, Boston, Mass., for plaintiff.

John R. Hally and Wm. Baker, Nutter, McClennen & Fish, Boston, Mass., for all defendants.

OPINION

CAFFREY, Chief Judge.

Plaintiff brings this action under the antitrust laws of the United States seeking permanent injunctive relief and treble damages pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, for defendants' alleged violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The Court has jurisdiction of the action and the parties under 15 U.S.C. §§ 15, 22, and 26.

I. Proceedings to Date

Plaintiff commenced this action on March 11, 1982, alleging that the so-called "single tire rule" (described below), as adopted under the circumstances of this case, violated Section 1 of the Sherman Act in that it constituted an illegal group boycott, a tying arrangement, and a tortious interference with plaintiff's advantageous business relations.

Plaintiff sought a preliminary injunction against the use of the tire rules at the defendant tracks for the 1982 racing season. After an evidentiary hearing upon the motion on March 22, 1982, this Court denied plaintiff's motion for preliminary injunction in an opinion dated March 31, 1982.

On April 15, 1982 defendant filed a counterclaim for a declaratory judgment as to the validity under the antitrust laws of the single tire rule, as adopted in this case, and if adopted in the future.

The case was tried to this Court from December 14 through 20, 1982. At the close of its case plaintiff waived Counts 3 through 7, leaving only claims that the adoption of the single tire rule was a concerted refusal to deal, and as such was unlawful under the Sherman Act, Section 1 either per se (Count 1), or under the rule of reason (Count 2). Hoosier waived its counterclaim.

This opinion will constitute the Court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).

II. Parties

A. Plaintiff

M & H Tire Co., Inc. (M & H) is a Massachusetts Corporation with its principal place of business in Watertown, Massachusetts. M & H designs, produces, and sells racing tires for use in organized motorcar-racing competition. Marvin Rifchin is the President of M & H.

B. Defendants

1. Hoosier Racing Tire Corp. (Hoosier) is an Indiana Corporation with its principal place of business in Lakeville, Indiana. Hoosier also designs, produces, manufactures, and sells racing tires and does business in direct competition with M & H. Robert Newton is the President of Hoosier.

2. Bobby Summers is the New England distributor for Hoosier and resides in Connecticut.

3. New England Drivers and Owners Club (NEDOC), organized in 1970, is an unincorporated association existing under the laws of Massachusetts, with an address in Franklin, Massachusetts. NEDOC is an association many of whose members are racing-car owners or drivers who compete in organized racing events in the Northeastern United States. NEDOC is composed of many but not all, of the racing car drivers and owners who compete in the modified class at Stafford Motor Speedway, Seekonk Speedway, Thompson Speedway, and Riverside Speedway. Richard Armstrong is the President of NEDOC.

4. Stafford Springs Enterprises, Inc. is a Connecticut corporation with its principal place of business in New Britain, Connecticut. Stafford Springs Enterprises, Inc. owns and manages Stafford Motor Speedway (Stafford), in Stafford Springs, Connecticut, and promotes organized automobile racing events at that facility. Edwin Yerrington is the promoter of that track.

5. Bristol County Stadium, Inc. (Bristol County) is a Massachusetts corporation with its principal place of business in Seekonk, Massachusetts. Bristol County leases the Seekonk Speedway in Seekonk, Massachusetts. Bristol County is owned and managed by D. Anthony Venditti and his family, and has its principal place of business in Venditti's home. Through ARC (below) and Venditti, Bristol County is responsible for promoting auto racing and other events at the track.

Both Stafford and Seekonk Speedway (Seekonk) feature "short oval" or "circle" track automobile racing in various classes, including the modified class. The bulk of the participants in such racing are amateur drivers who race several times weekly during the season.

6. Auto Racing Club (ARC) is a nonprofit Massachusetts corporation. ARC was organized by Venditti and also has its headquarters in Venditti's home. ARC promotes the automobile racing conducted at Seekonk, segregating divisions, supplying insurance, handicapping racers, conducting the races, paying referees and officials, disbursing prize money from funds it received from Bristol County and promulgating rules (including the subject single-tire rule).

III. General Background

The present controversy grew out of a decision involving Hoosier, its dealer Summers, NEDOC, and the promoters at four major automobile race tracks, to adopt a rule requiring drivers to use a Hoosier "Budget" tire during the 1982 automobile racing season. Under this commonly called "track-tire" rule, only one brand of tire can be used at a particular track during a racing season.

A. The Racing Tire Market

It is not disputed that the production and sale of racing tires constitutes a distinct market in interstate commerce. Racing tires are designed for use on high performance vehicles in organized competition rather than for street or highway use. They differ from street tires, in size, construction, and materials and they require specialized equipment and technical knowledge for their manufacture.

During 1982, the active manufacturers of racing tires of the sort involved in this case were M & H, McCreary Tire and Rubber Co. (McCreary), Goodyear, and Hoosier, Firestone had largely dropped out of this market by 1982.

Traditionally, racing tires were sold by independent dealers to racing car owners and drivers. Tires were transported by dealers to the race tracks and sold directly to drivers and owners from the dealers' trucks on the day of the race. Under the open competition system which traditionally has prevailed in the racing tire market, the sales of a particular brand of tire were directly related to the success which the tire had enjoyed at recent races. As Hoosier President Robert Newton testified, sales were based on last night's or last week's results, the reasonable inference being, that upon learning that winning cars have raced with a particular tire, drivers and owners would change brands to purchase the "winning circle" brand for their own cars. Consequently, tire companies competed vigorously throughout the racing season by making technical adjustments and introducing new tires in order to improve their sales.

B. Racing in the Northeast

There are numerous distinct classes of racing cars, each with its own set of rules, and its own special tire needs. The most popular and prestigious class of racing in the Northeast is the modified class, which attracts the fastest cars, draws the most spectators, and pays the largest purses in the region. Technical standards for modified race cars are promulgated by the National Association of Stock Car Auto Racing, Inc. (NASCAR). NASCAR, which is not a party in this lawsuit, sanctions and administers races at those tracks that adhere to its rules and conducts a "point fund" for drivers who compile the best record in NASCAR-sanctioned events. Modified racing is conducted at Stafford, Seekonk, Riverside Park Speedway (Riverside), and Thompson Speedway (Thompson). Stafford, Thompson, and Riverside are sanctioned by NASCAR. In order to allow drivers the opportunity to compete for NASCAR points, these three tracks schedule their regular events on different days of the week so that drivers can race at each track in the course of a weekend. NASCAR does not sanction races at Seekonk, but Seekonk follows the NASCAR rule book for its modified class.

NASCAR is not a recognized sanctioning organization. The NASCAR rules regulate only sanctioned events and thus do not embody a thoroughly regulatory scheme over the tracks as a whole, or even over all modified races at the tracks. The NASCAR rules leave the tracks free to promulgate regulations regarding the equipment used by competitors. It is to be noted that NASCAR regulations do not regulate the compounds or the brands of tires to be used at NASCAR-sanctioned events.

NEDOC, as stated above, is composed of drivers and owners who race in the modified divisions at the four above-stated tracks. As is the case with NASCAR, NEDOC is not a recognized sanctioning organization. NEDOC's principal function has been to negotiate with promoters on behalf of drivers and owners. The organization has also been a source of proposals for rules to be adopted by the tracks. Among the rules proposed were those regulating equipment such as gear and carburetor rules, as well as bans on the use of fuel injection and aluminum block engines. Rules such as these regulating equipment had the avowed purpose of enhancing participant equality.

C. The Cost of Automobile Racing

Modified racing cars originally resembled "stock cars" sold for street use and ran on tires similar to street tires. During the 1960's, however, competitors began to refurbish their cars with special racing components that increased engine horsepower and reduced car weight. In response, tire companies began to produce wider, softer tires capable of handling greater horsepower and speed. Since 1975, the costs of modified racing have increased substantially due to more expensive engines, chassis, frames, fuel, and tires. However, according to Arute, owner of Stafford, the prize money has remained...