Freeman v. Sports Car Club of America, Inc.

• Decision Date: 13 April 1995
• Docket Number: 94-3337,Nos. 94-3251,s. 94-3251
• Citation: 51 F.3d 1358
• Parties: John K. FREEMAN, Plaintiff-Appellant, Cross-Appellee, v. SPORTS CAR CLUB OF AMERICA, INC., Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1358

51 F.3d 1358

John K. FREEMAN, Plaintiff-Appellant, Cross-Appellee, v. SPORTS CAR CLUB OF AMERICA, INC., Defendant-Appellee, Cross-Appellant.

Nos. 94-3251, 94-3337.

United States Court of Appeals Seventh Circuit.

Argued Feb. 16, 1995.

Decided April 13, 1995.

Bryce H. Bennett, Jr. (argued) and Charles P. Edwards, Riley, Bennett & Egloff, Indianapolis, IN, for plaintiff.

Michael A. Wukmer, Ice, Miller, Donadio & Ryan, Indianapolis, IN and Kelly J. Smith (argued), Wheat Ridge, CO, for defendant.

Before CUMMINGS, CUDAHY and ROVNER, Circuit Judges.

CUMMINGS, Circuit Judge.

John Freeman, a certified public accountant by trade, appears passionately devoted to two hobbies: sports car racing and federal litigation. The present case is the third chapter in his ongoing effort to combine these two pursuits. On December 22, 1992, Freeman sued the Sports Car Club of America, Inc. ("SCCA") for failing to reinstate his racing license following his second six-month suspension. The district court granted summary judgment for SCCA. Freeman, not surprisingly, appeals, and SCCA appeals the denial of its counterclaim seeking damages under the non-litigation provision of its General Competition Rules ("GCR").

I. Background

SCCA, a Connecticut not-for-profit corporation with its principal place of business in Englewood, Colorado, is a 50,000-member organization of sports car enthusiasts and road racers. Membership in the organization is a prerequisite for obtaining an SCCA racing license and competing in SCCA-sponsored events.

SCCA's large grassroots program of amateur club road racing is governed by rules collected in the GCR. Detailed regulations prescribe specifications for the cars that can compete in various classes and promulgate standards for driver conduct and meet organization as well as for disciplinary and appeals procedures. Competitors who violate these rules are assessed penalty points, and those who accumulate a certain number of points in a fixed time period face mandatory suspension of their racing licenses.

A summary of Freeman's history in the SCCA will place the present lawsuit in the proper context. Freeman began competing in SCCA amateur races in the mid 1980s. In 1988 Freeman started a business, Sports Racing Services ("SRS"), buying and selling race cars and parts. SRS entered into a contract with SCCA's wholly owned subsidiary, SCCA Enterprises, Inc. ("Enterprises"), which builds and sells "Spec Racers" to compete in their own class in SCCA events. ¹ The contract authorized SRS to resell and service Spec Racers as a customer service representative for Enterprises.

During the time Freeman owned and operated SRS, he continued to compete in SCCA-sanctioned races. On September 30, 1990, Freeman was charged with "reckless or dangerous driving," a violation of Sec. 20.1.4 of the GCR, and was assessed a six-event probation. The Steward of the Meet ("SOM") upheld Freeman's probation as did the SCCA National Court of Appeals which heard the appeal even though it was not timely filed.

In January 1991, Enterprises canceled its agreement with SRS under a provision of the contract allowing termination by either party upon 30 day's notice. On February 28, 1991, SRS and Freeman sued SCCA and Enterprises among others. Although the details of the litigation, which Freeman refers to ominously as the "antitrust suit," are not clear from this record, it appears that Freeman charged SCCA and Enterprises with violations of federal antitrust laws based on provisions of the GCR relating to the Spec Racer and "Shelby Can Am," another single-car, single-maker class sanctioned by the SCCA. The case was transferred to the District Court of Colorado which granted summary judgment in favor of all of the defendants. ²

Back on the racing front, Freeman continued to rack up penalties. On April 28, 1991, he was assessed a two-lap penalty when an inspector found the track width on his Mitsubishi Mirage showroom stock racer to be out of specification. The SOM upheld the decision and Freeman did not appeal. On May 25, 1991, Freeman was again penalized for his showroom stock car's failure to conform to specification.

On June 5, 1991, Freeman brought his second lawsuit against the SCCA in the district court for the Southern District of Indiana. On the same day he obtained an ex parte temporary restraining order ("TRO") prohibiting the SCCA from "[d]isqualifying or otherwise penalizing plaintiff's 1989 Mitsubishi Mirage from competition in the race scheduled for June 8 and 9, 1991 at Road America, Wisconsin" (the "Road America race"). ³

Freeman subsequently competed in the Road America race with the TRO taped to the rear driver's side window of his race car, dropping out with mechanical problems after four laps. Following a protest by another competitor, Freeman's car was inspected and its track width found to be out of specification. Once again, Freeman received penalty points for entering a non-complying race car. Freeman did not appeal this decision.

On June 15, 1991, Freeman received verbal reprimands for several other GCR violations. On July 7, 1991, Freeman was disqualified from a race and assessed penalty points for passing under a yellow flag. Freeman appealed this decision so the penalty points were not charged against his license until August 8, 1991, when the SCCA's National Court of Appeals upheld the decision of the SOM. On July 9, 1991, while the appeal was pending and before this last set of penalty points was assessed, the SCCA Licensing Department asked Freeman to return his competition license and to serve a six-month mandatory suspension because of his accumulation of penalty points. On September 9, 1991, the SCCA received Freeman's license which triggered the start of his six-month suspension.

On March 9, 1992, Freeman's license was reinstated. On April 26, 1992, however, Freeman was once again disqualified from a race and assessed penalty points for entering his out-of-specification Mitsubishi. Freeman appealed this decision and the penalty points were not assessed until the SCCA National Court of Appeals ruled against him on May 27, 1992. These points, along with those assessed in August 1991, led to another six-month suspension of Freeman's competition license.

The SCCA received Freeman's license on June 4, 1992, making him eligible for reinstatement on December 4, 1992. On December 13, 1992, Freeman wrote to SCCA's Licensing Department requesting reinstatement. Freeman's request was forwarded to SCCA's Competition Board, which held telephonic meetings beginning December 21, 1992, to discuss whether Freeman's license should be reinstated. On December 22, 1992, Freeman filed the present action seeking, among other relief, a TRO requiring that SCCA immediately reinstate his license. On December 23, 1992, not yet aware of the most recent lawsuit, the Competition Board voted to revoke Freeman's racing license pursuant to GCR Sec. 14.6.3. This provision permits the Competition Board permanently to revoke a driver's license if the driver acts contrary to the best interests of SCCA. The Competition Board's action was spurred by Freeman's multiple attempts to litigate SCCA rule decisions in violation of Sec. 3.9.1. of the GCR which bars such litigation. The Competition Board notified Freeman that he could appeal this decision to the National Court of Appeals and/or apply for reinstatement in six months. Freeman instead proceeded with this lawsuit.

On September 1, 1993, the SCCA's Board of Directors voted to hold a hearing to determine whether to expel Freeman from membership. The Board of Directors held a hearing on December 2, 1993, which Freeman attended with counsel. The next day, Freeman was expelled from the organization.

II. Procedural History and Lower Court Disposition

Freeman's verified complaint for damages and injunctive relief filed December 22, 1992, contains three counts. In Count I, Freeman alleges that SCCA's articles of incorporation, by-laws, and rules create a binding contract between the association and its members. Freeman further alleges that SCCA breached its own rules and thus the contract between SCCA and Freeman when it failed to reinstate his license.

In Count II, Freeman alleges that SCCA denied him due process by violating its own rules requiring notice and a hearing before revoking his license.

In Count III, Freeman alleges that by assessing penalty points against him during the Road America races the SCCA violated the ex parte TRO granted in his earlier lawsuit.

Each count incorporates by reference "rhetorical paragraph 10" which states that "Defendant has failed to reinstate Plaintiff's license perhaps in retaliation against Freeman for filing suit against the Defendant for violations of federal antitrust law."

On January 5, 1993, SCCA filed its answer and a counterclaim seeking damages against Freeman for initiating this lawsuit in breach of Sec. 1.2.4 of the GCR, which states that decisions of SCCA officials are non-litigable. On February 12, 1993, SCCA filed a motion to dismiss for lack of subject matter jurisdiction and an alternative motion for summary judgment. Finally on August 5, 1994, after much jousting and the recusal, at Freeman's request, of the original trial judge, Judge McKinney granted summary judgment for SCCA on all three of Freeman's counts and for Freeman on SCCA's counterclaim.

Judge McKinney found that because the provisions of the GCR requiring notice and hearing before a penalty is assessed apply only to decisions of the SOM and not to discretionary decisions made by the Competition Board, SCCA did not violate its own rules when it revoked Freeman's license. Because SCCA did not violate its own rules it neither breached its contract with Freeman nor denied him process due under the rules. As to Count III, Judge McKinney found that in assessing penalty points against Freeman after allowing him to compete, the SCCA did not violate the...