Golf City, Inc. v. Wilson Sporting Goods, Co., Inc.

Decision Date05 July 1977
Docket NumberNo. 75-2764,75-2764
Citation555 F.2d 426
Parties1977-1 Trade Cases 61,521 GOLF CITY, INC., Plaintiff-Appellee Cross Appellant, v. WILSON SPORTING GOODS CO., INC., et al., Defendants-Appellants Cross Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Phillip A. Wittmann, New Orleans, La., Howard Adler, Jr., William P. MacGregor, Washington, D. C., for Wilson Sporting Goods.

Peter K. Bleakley, Stephen M. Sacks, Washington, D. C., Donald W. Doyle, Howard J. Smith, Jr., New Orleans, La., for Pro Golfers.

Henry L. Klein, New Orleans, La., for plaintiff-appellee cross appellant.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before MORGAN and FAY, Circuit Judges, and HUNTER, District Judge. *

LEWIS R. MORGAN, Circuit Judge:

Golf City, Inc., a golf specialty retail store located in New Orleans, Louisiana, brought this antitrust action more than seven years ago after numerous golf equipment manufacturers refused to sell to Golf City their prestige lines, or "pro-lines," of golf equipment. Golf City alleged that the refusals to deal arose out of a conspiracy involving the manufacturers and the Professional Golfers' Association of America (PGA).

The original defendants were PGA and fourteen of the manufacturers. All but one of the manufacturers, Wilson Sporting Goods Co. (Wilson), settled with Golf City along the way. After extensive discovery, the case against Wilson and PGA was tried to the district court sitting without a jury. In February, 1975, the court issued what it styled a Memorandum of Reasons, finding that Wilson and PGA had violated section 1 of the Sherman Act. 1 Then, in May, 1975, the court issued another Memorandum of Reasons awarding Golf City treble damages, interest, and attorneys' fees.

Appellants Wilson and PGA launch a broad attack on the district court's decision. On the question of liability, they urge that the district court's findings of fact, required by Rule 52(a) of the Federal Rules of Civil Procedure, do not give a clear understanding of the basis of the court's decision. Appellants contend alternatively that the finding of liability was clearly erroneous in the face of certain uncontradicted defense evidence. With respect to damages, Wilson and PGA seek to impugn the adequacy of Golf City's figures. Moreover, appellants challenge the district court's calculation of net profit as clearly erroneous and question the district court's complete failure to deal with the question of mitigation of damages. Finally, Wilson and PGA assert that the district court made an error of law in its award of interest and awarded excessive attorneys' fees. PGA, in a separate argument, challenges an earlier district court decision holding that PGA had transacted business in the Eastern District of Louisiana within the meaning of the federal venue statute.

Golf City contends in a cross-appeal that the district court should have awarded additional damages and attorneys' fees. 2

A. The Golf Equipment Industry

Golf equipment 3 merchandising in the United States is two-tiered. One tier is pro-line equipment and the other tier is store-line equipment. Some manufacturers offer only pro-line equipment, and others offer both pro-line and store-line equipment. The manufacturers generally restrict the sale of their pro-line equipment. Since 1930, 4 for example, appellant Wilson has sold its pro-line equipment "only to pro shops located at outdoor golf courses or driving ranges." The pro-line golf equipment is heavily advertised by the manufacturers in golf magazines and in other publications, and these advertisements generally state that the equipment is available only at pro shops. Because pro shops operated by golf professionals are the common beneficiaries of the manufacturers' restrictive distribution policies for pro-line equipment, the policies are referred to as pro only sales policies.

Store-line equipment ordinarily is sold to any retail outlet that meets certain credit requirements. The manufacturers do very little direct advertising of their store-line equipment.


PGA is a self-described 5 trade association of golf professionals. According to PGA, 6 approximately 4,600 PGA members were head professionals at the 10,870 golf clubs or courses in the United States as of September 1, 1974. Thus, PGA members accounted for nearly 50 per cent of the pro shop outlets in the country as of that date.

C. Golf City

As we have stated, Golf City is a golf specialty retail establishment located in New Orleans, Louisiana. Golf City's owner is James H. "Buddy" Orange, a former automobile executive who became a golf enthusiast in the 1960's and who, in 1968, developed an interest in entering the golf equipment retailing business.

Orange obtained the initial inventory for Golf City from Burt Dargie, the owner of a golf specialty store in Memphis, Tennessee. Orange testified that he had modeled Golf City after Dargie's operation and that the two stores shared such attributes as special machines for evaluating one's golf swing, large display areas, and a complete repair facility. 7 After Golf City opened in April, 1969, Orange sought to increase the store's inventory of pro-line merchandise by purchasing some directly from the manufacturers. Orange was repeatedly rebuffed. 8 In December, 1969, Golf City sued.

A. Injury

Golf City brought its action under section 4 of the Clayton Act, 9 which grants a private cause of action for antitrust violations to any person "injured in his business or property" by the anticompetitive conduct. Golf City identifies the injury to its business or property as "the inability to purchase (pro-line equipment) directly from the manufacturers." Brief for Golf City at 46.

B. Conspiracy

The injury alleged must be caused by an antitrust violation. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977). Golf City contends that the refusals of the manufacturers to deal with it in pro-line merchandise were born of a conspiracy involving the manufacturers and PGA, a conspiracy "designed to exclude from the market direct competitors of some members of the combination", E. A. McQuade Tours, Inc. v. Consolidated Air Tour Manual Committee, 467 F.2d 178, 186-87 (5th Cir. 1972), cert. denied, 409 U.S. 1109, 93 S.Ct. 912, 34 L.Ed.2d 690 (1973), and therefore a conspiracy unlawful per se under section 1 of the Sherman Act.

Appellants Wilson and PGA maintain, as they have throughout the course of the litigation, that the pro only sales policies which dictated the refusals to deal with Golf City were adopted unilaterally by each manufacturer and are so maintained. Appellants contend that the pro only sales policies are in wide use because they are an effective form of non-price competition consumers like to purchase prestige golf equipment available only at pro shops. Appellants' point, if factually correct, would be a complete defense to the section 1 allegation, because (s)ection 1 . . . is directed only at joint action. (citation omitted) It does not prohibit independent business actions and decisions. A person still has the right to refuse to do business with another, provided he acts independently and not pursuant to an unlawful understanding, tacit or expressed.

Modern Home Institute, Inc. v. Hartford Accident & Indemnity Co., 513 F.2d 102, 108 (2d Cir. 1975).

The mere fact that substantially all of the manufacturers approached by Golf City refused to deal does not permit the inference of conspiracy. We quote again from the Second Circuit's Modern Home Institute :

Both sides agree that parallel behavior alone is not sufficient evidence of conspiracy to find a Sherman Act § 1 violation. (citations omitted) The mere fact that all defendant companies were initially enthusiastic about plaintiff's proposal and then rejected it, even if they knew the other defendant companies were doing likewise, is not enough to defeat the motion for summary judgment. (citation omitted) Such parallel conduct is consistent with independent competitive decisions or at most reflects a non-consensual decision not to compete. Additional facts or circumstances are needed to show that the decisions were interdependent and thus raise the inference of a tacit agreement to boycott. (citations omitted)

513 F.2d at 110.

The "additional facts or circumstances" offered by Golf City to raise the inference of conspiracy were adduced in a series of documents designated collectively in the record as exhibit P-76. 10 The P-76 documents were obtained from PGA during discovery. They are chiefly letters and reports and, for the most part, they chronicle PGA's efforts between 1967 and 1969 to stop golf pros from participating in what is called the bootleg market in pro-line equipment. Apparently many pros are willing to sell some of the pro-line equipment they have bought from the manufacturers to outlets like Golf City that cannot obtain the goods directly. This bootleg market is also called leakage.

The main character in the events revealed in the P-76 documents was William Clarke, who then 11 was chairman of a PGA committee called the Manufacturers' Relations Committee. Another key character was Joe Wolfe, a Wilson executive who chaired a committee of manufacturers' representatives that was the industry counterpart of the Clarke Committee. There is no doubt that these documents show a continuing effort in the late sixties by Clarke and Wolfe to stop leakage.

This antileakage evidence naturally drew the parties to a 1966 Supreme Court case, United States v. General Motors Corp., 384 U.S. 127, 86 S.Ct. 1321, 16 L.Ed.2d 415 (1966), and the district court made General Motors the legal centerpiece for its decision on liability. In General Motors, the big auto maker's Chevrolet dealers in the Los Angeles area complained to GM that some dealers were reselling their cars to discount...

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