Dixon v. Nat'l Hot Rod Ass'n

Decision Date30 March 2020
Docket NumberNo. 1:19-cv-01470-JRS-DML,1:19-cv-01470-JRS-DML
Citation450 F.Supp.3d 831
Parties Larry DIXON, Larry Dixon Racing, LLC, Championship Adventures, LLC, Plaintiffs, v. NATIONAL HOT ROD ASSOCIATION, Defendant.
CourtU.S. District Court — Southern District of Indiana

Benjamin T. Major, Pro Hac Vice, Monica Cooper, Pro Hac Vice, W. Mark Lanier, Pro Hac Vice, The Lanier Law Firm, Houston, TX, Robert Thomas Dassow, Hovde Dassow & Deets LLC, Indianapolis, IN, for Plaintiffs

David Reichenberg, Pro Hac Vice, Cozen O'Connor P.C., New York, NY, Paul K. Leary, Jr., Pro Hac Vice, Thomas M. O'Rourke, Pro Hac Vice, Cozen O'Connor P.C., Philadelphia, PA, Jonathan D. Mattingly, Mattingly Burke Cohen & Biederman LLP, Indianapolis, IN, for Defendants

Order on Motion to Dismiss


Invoking this Court's federal question jurisdiction, diversity jurisdiction and supplemental jurisdiction, Plaintiffs Larry Dixon ("Dixon"), Larry Dixon Racing, LLC, and Championship Adventures, LLC, (collectively "Plaintiffs" and the latter two collectively "the entity Plaintiffs") bring various common law and antitrust claims against Defendant National Hot Rod Association ("NHRA"). (Am. Compl., ECF No. 20.) Dixon is a drag race driver who has competed in NHRA events for almost twenty-five years. In 2017, NHRA suspended Dixon for displaying a two-seater top-fuel drag car at a tradeshow that appeared to be, but in fact was not, endorsed by NHRA. Plaintiffs allege the following claims: that NHRA's internal discipline procedures denied Dixon due process; that NHRA defamed Dixon by falsely claiming he had violated NHRA rules; that NHRA interfered with Dixon's two-seater dragster business; that NHRA breached its own rules by refusing to allow Dixon a final appeal; that NHRA trespassed into Dixon's two-seater dragster prototype and unlawfully removed an NHRA sticker from the inside of the car; that NHRA made numerous misrepresentations to Dixon, knowing they were untrue; and that NHRA coerced Dixon to stop promoting his two-seater dragster in exchange for reinstatement in the NHRA. Plaintiffs also bring several antitrust claims, including a group boycott, unlawful monopolization, attempted monopolization, conspiracy to monopolize, reciprocal dealing, refusal to deal, and illegal tying or tie-in arrangements, in violation of the Sherman Act, 15 U.S.C. § 1 et seq. and the Cartwright Act, Cal. Bus. & Prof. Code §§ 16700 - 16770.

NHRA now moves to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. For the following reasons, NHRA's Motion to Dismiss (ECF No. 25) is denied in part and granted in part and NHRA's Motion Requesting Oral Argument (ECF No. 27) is denied .

I. Background1

NHRA is a governing body for the sport of drag-racing. (Am. Compl. ¶ 17, ECF No. 20.) NHRA hosts drag-racing competitions and makes and enforces the rules that govern those events. (Id. ¶¶ 17 & 18; Rulebook vi, ECF No. 20.) The rules cover the safety of racing vehicles and equipment; bind all NHRA teams, members, cars, and drivers; and are contained in the NHRA Official Rulebook ("Rulebook"). (Rulebook §§ 1.2 & 1.3, ECF No. 20, ECF 26-1.) The Rulebook is the "principal source of authority for the conduct of events," "governs all decisions at NHRA events and governs all NHRA matters affected by the Rulebook, and provides "guidance in the conduct of NHRA events and events conducted at NHRA member tracks, and as to all aspects of participation in NHRA, whether or not related to an event." (Id. at § 1.2.)

The Rulebook contains a Covenant Not to Sue. (Id. at § 1.3.2.) In exchange for their participation in NHRA, all participants agree to the following:

All decisions made by NHRA, including but not limited to those made during or incident to an event, are final and may not be appealed except as expressly subject to review herein, and such decisions may not be made the basis of a lawsuit. The participant further agrees to release and waive from liability and not to bring any action against NHRA ... for any loss, damage, or injury, including without limitation economic loss or damages, caused by any decision, erroneous or otherwise, including without limitation decisions based on malfunctioning electronic or mechanical equipment, and all whether due to negligence or otherwise.

(Id. at § 1.3.2 (7).) Participants also agree not to initiate any legal action against NHRA for its publication or release of information regarding a Statement of Action Against Participant. (Id. § The Rulebook also mandates that all disputes "be resolved exclusively pursuant to the dispute resolution procedures provided in this Rulebook." (Id. at § 1.3.2(8).)

Dixon has participated as a driver and/or team owner in NHRA for almost twenty-five years. (Am. Compl. ¶ 30, ECF No. 20.) Dixon is a "participant" in the NHRA, which the Rulebook defines as: "any person or entity that has any ownership interest in a race team, vehicle, or otherwise" and "any person or entity directly or indirectly associated with any vehicle that has been permitted to enter an event site for the purpose of participation in an event, including, but not limited to, owners, drivers, and crewpersons." (Rulebook § 1.1, ECF No. 20.) Participation in NHRA requires "a promise and agreement by all participants to abide by all NHRA rules, regulations, and agreements." (Id. at § 1.3.)

In 2012, Dixon formed Larry Dixon Racing, LLC—a driver-for-hire service in Indiana. (Am. Compl. ¶ 33, ECF No. 20.)

In 2015 and 2016, Dixon began developing a plan to create a two-seater top-fuel vehicle. (Id. ¶ 34.) A professional drag racer would drive the car while a fan or member of the public would sit in the passenger seat. (Id. ) Beginning in Spring 2016 and continuing into 2017, Dixon discussed his idea for the two-seater dragster with NHRA, including NHRA president Peter Clifford and vice president of competition, Graham Light. (Id. ¶ 36.) NHRA representatives expressed enthusiasm for his idea. (Id. )

Dixon then obtained an investor and formed Championship Adventures, LLC to develop a prototype two-seater dragster. (Id. ¶ 38.) In constructing the two-seater dragster, Dixon consulted with Murf McKinney, a member of the SFI Chassis Committee, the organization responsible for issuing and administering standards for the quality assurance of racing equipment. (Id. ¶¶ 41 & 42.) The SFI Chassis Committee is independent from the NHRA. (Id. ) Dixon engaged in discussions and negotiations with racetracks, prospective sponsors, and others regarding the commercialization of the two-seater dragster. (Id. ¶ 107.) While Dixon was developing his two-seater dragster, NHRA contacted racetracks and instructed them not to do business with Dixon regarding his two-seater dragster. (Id. ¶ 104.)

Dixon used a car that originally competed in NHRA events to create his two-seater prototype. (Id. ¶ 49.) The chassis of the prototype therefore bore an NHRA inspection sticker in the cockpit. (Id. ) The sticker expired in 2015 or 2016. (Id. ¶ 48.) The prototype was insured by K&K, a professional racing-industry insurance underwriter. (Id. ¶ 45.)

Dixon first displayed his two-seater dragster prototype at the 2017 Specialty Equipment Market Association ("SEMA") show in Las Vegas. (Id. ¶ 46.) During the first day of the show, while Dixon was away from his prototype, an NHRA representative saw the NHRA inspection sticker in the cockpit of the two-seater dragster. (Id. ¶ 48.) The NHRA representative requested that the sticker be concealed, so one of Dixon's representatives covered it with tape. (Id. ¶¶ 51 & 52.) When Dixon returned to his exhibit, his representatives informed him of NHRA's actions. (Id. ¶ 54.) Dixon then looked underneath the tape and saw that the sticker was gone. (Id. )

On the last day of the SEMA show, November 3, 2017, NHRA sent Dixon a "Statement of Action Against Participant" which stated, in relevant part:

As you were told by NHRA officials on multiple occasions, NHRA has not and will not approve a two-seat top fuel dragster for a variety of reasons, including but not limited to the fact that the SFI Foundation will not issue a chassis specification for such use. The two-seat top fuel dragster concept presents serious safety concerns that have not been satisfied and that we do not believe can be satisfied. Nonetheless, you had built and included an NHRA chassis tag on an unauthorized and unapproved two seat dragster that you both drove on a track and publicly displayed. Despite the fact that the tag was expired, it implied NHRA's approval, which as you know was never granted.

(Id. ¶ 57; Statement of Action, ECF No. 26-2 at 2.) The Statement of Action informed Dixon that he violated Sections 1.3.1 (Participant Conduct) and 1.6.3 (Chassis Inspection) of the Rulebook by displaying the NHRA chassis tag on a chassis that had been radically altered since the inspection, and by falsely identifying his two-seat top fuel dragster as being certified. (Statement of Action, ECF No. 26-2 at 2-3.) § 1.3.1 states: "Any participant who, in the sole and absolute judgment of NHRA ... (4) engages in conduct detrimental to the sport of racing; (5) otherwise creates a condition or circumstance that is unsafe, unfair, or out of order ... shall have violated this rule regarding participant conduct." § 1.6.3 states: "If at any time a vehicle does not comply with current NHRA Chassis Certification requirements, it will not be operated in any manner at an NHRA track, NHRA member track, or anywhere at all outside a repair garage, until required repairs have been completed and certification or recertification is obtained." Dixon's privilege to participate in NHRA racing was revoked indefinitely. (Statement of Action, ECF No. 26-2 at 3.)

On November 14, 2017, Dixon submitted a response to the Statement of Action. (Am. Compl. ¶ 75, ECF No. 20.) NHRA then issued a "Response to Statement of Action Against Participant" upholding his...

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