Spectators' Communication v. Colonial Country Club

• Decision Date: 31 May 2001
• Docket Number: INC,No. 98-11453,ANHEUSER-BUSC,98-11453
• Citation: 253 F.3d 215
• Parties: (5th Cir. 2001) SPECTATORS' COMMUNICATION NETWORK INC.; FRANK L. MITCHELL, PLAINTIFFS - APPELLANTS, v. COLONIAL COUNTRY CLUB; ET AL., DEFENDANTS, , DEFENDANT - APPELLEE
• Court: U.S. Court of Appeals — Fifth Circuit

Page 215

253 F.3d 215 (5th Cir. 2001)

SPECTATORS' COMMUNICATION NETWORK INC.; FRANK L. MITCHELL, PLAINTIFFS - APPELLANTS, v. COLONIAL COUNTRY CLUB; ET AL., DEFENDANTS, ANHEUSER-BUSCH, INC., DEFENDANT - APPELLEE.

No. 98-11453

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

May 31, 2001

Appeal from the United States District Court for the Northern District of Texas Before Politz, GIBSON,^* and Higginbotham, Circuit Judges.

John R. Gibson, Circuit Judge.

Spectators' Communication Network and its owner, Frank Mitchell,¹ appeal from the summary judgment entered in favor of Anheuser-Busch, Inc., the only remaining defendant in their antitrust suit alleging that Spectators' was excluded from broadcasting professional golf tournaments. Spectators' contends that the PGA and the other defendants organized a group boycott of Spectators' in order to put it out of business. We conclude that Spectators' made an adequate showing of an antitrust conspiracy that makes economic sense. Although Spectators' has not shown a horizontal boycott that would constitute a per se violation of the Sherman Act, it should be allowed the chance to prove its case under the rule of reason. We therefore reverse the entry of summary judgment for Anheuser-Busch on Spectators's antitrust claim. However, we affirm the district court's entry of judgment for Anheuser-Busch on Spectators's state law claims.

Spectators' pioneered the use of on-site radio broadcasting at professional golf tournaments. Because golf fans at a tournament can only see a small part of the action going on at any time, Spectators' began to report events taking place at other locations at the tournament. Broadcasts were available only on the golf course and were transmitted through special low-frequency radios. Spectators' made money by selling advertising rights for on-air commercials and for logos which were placed on the special radios.

The world of professional golf, in which Spectators' operates, consists of several tiers of interests that figure in this case. At the top is the Professional Golf Association, or PGA, which controls the golfers through contracts that restrict the golfers from playing in non-PGA events if they wish to remain on the PGA Tour.

The second tier of interests is composed of the sponsors, which in turn consist of two classes: "tournament sponsors," who organize and conduct the tournament as co-sponsors with the PGA, typically to raise money for local charities; and "corporate sponsors," who support the Tour tournaments financially in exchange for publicity. The sponsors were associated in an organization called American Golf Sponsors, which included NEC, K-Mart and Anheuser-Busch, all of whom were corporate sponsors of tournaments. Through a standard Sponsor Agreement, the PGA required the tournament sponsors to transfer all media rights, including television and radio broadcast rights, to the PGA and to give the PGA veto power over any radio broadcasting equipment that would be placed on the golf course.

The third tier of interests consists of Spectators' and its competitors in the on-site broadcasting business. Eventually, the PGA took over the on-site broadcasting niche itself, arranging to have the Tour events broadcast by Vanguard International, LLC, broadcasting as the "PGA Tour Radio Network."

Spectators' contends that the relevant market is the market for on-site advertising at golf tournaments. According to Spectators', this market is not interchangeable with other kinds of sports advertising because of the unusually desirable demographic characteristics of the people who attend golf tournaments, in that the spectators are affluent, highly educated, and busy.

From 1986 to 1990, Spectators' dealt directly with the PGA, which reserved the right to "exercise extensive controls" and to charge Spectators' a fee for the privilege of broadcasting. Their relationship ended in 1990, and Spectators' sued the PGA. In the summer of 1991, the PGA gave Spectators' permission to enter broadcasting deals with the sponsors of individual tournaments. That fall Spectators' and Anheuser-Busch entered a contract for Spectators' to broadcast sporting events as the "Budweiser Spectators Network," which involved advertising Anheuser-Busch products on-air and putting Anheuser-Busch logos on the Spectators' radios at one golf tournament, a car race, and a tennis match. In November 1992, Anheuser-Busch confirmed by letter that it had agreed with Spectators' to sponsor the broadcast of seven unspecified events in 1993, with a formal contract to be drafted later. In April 1993, Anheuser-Busch and Spectators' entered a contract for advertising in connection with broadcasts at three golf tournaments: the K-Mart Greater Greensboro Open, the Anheuser-Busch Classic, and the NEC World Championship. Spectators' completed the first two broadcasts, but was unable to do the third because the sponsor, NEC, refused to permit Spectators' to broadcast from the golf course. Frank Mitchell, the owner of Spectators', testified in an affidavit that he learned from Barbara Burdick, an employee of NEC, that NEC had "succumbed" to the PGA's requests not to allow Spectators' to broadcast the NEC tournament. Similarly, Mitchell testified that in the fall of 1993, a representative of the K-Mart Greater Greensboro Open told him that the PGA would not allow the Greensboro tournament or other tournaments to let Spectators' broadcast at their tournaments.

Beginning in July 1993, Mitchell tape recorded several conversations with Anheuser-Busch's David Brunette in which Brunette said that Anheuser-Busch was under pressure from the PGA not to use Spectators':

You know, so I don't know, I mean they [the PGA Tour] don't want to give you, they don't mind if we do them [on-site broadcasts,] but they don't want us using you.

The gist of these conversations was that the PGA, and in particular, Gary Stevenson of the PGA, was hostile to Spectators' because of Spectators's lawsuit against the PGA and that the PGA would try to prevent Anheuser-Busch from working with Spectators'. For instance, Brunette reported:

[I]t's just that obviously, the PGA's just concerned about the fact that you know we're trying to deal with you and at the same time you're suing them. It's something that they have to grant us. We want to have the rights to do this and if they're not willing to grant us those rights, uh, you know, you've got somewhat of a battle if you start trying to do these things. . . . I mean, they're just pretty adamant about the fact that they don't, they're not very happy with what's going on and they don't cherish the fact that we'd be working with you, but that still doesn't have anything to do with the fact that the funding is tight.

Spectators' contends that the PGA also made concessions in other aspects of its regulation of tournaments to persuade Anheuser-Busch not to deal with Spectators'. Spectators contends that the PGA previously had in place a "no alcohol" policy; though the extent of such a policy is unclear, at the least the PGA Commissioner limited the advertising of alcoholic products in connection with the Tour. On September 22, 1993, Anheuser-Busch representatives met with the PGA's Gary Stevenson and Leo McCullagh. They reached an agreement on an extensive program called the "Michelob 19th Hole" program, which involved Anheuser-Busch becoming a sponsor of the Tour Championship, advertising during golf events on television, using the PGA's logo in product promotions, and maintaining a "19th Hole" pavilion, a mobile exhibit that included substantial advertising at the tournament site. Shortly after this meeting, Anheuser-Busch wrote Spectators', canceling the April 1993 contract.

Eventually, Anheuser-Busch's Michelob beer became the "official beer" of the PGA Tour.

Spectators' brought this suit against Colonial Country Club, NEC, K-Mart, American Golf Sponsors, Anheuser-Busch and the PGA Tour and its employee, Stevenson. The complaint alleged state commercial law and federal antitrust claims, in particular, that the defendants had engaged in a conspiracy to restrain trade in the market for professional golf tournament on-site advertising services.

Eventually, all the defendants except Anheuser-Busch were dismissed, either by the court or pursuant to agreements with the plaintiffs. Anheuser-Busch moved for summary judgment, which the district court granted. The court held that Spectators' failed to perform its obligation under the 1993 contract to broadcast the NEC tournament and therefore could not bring an action to enforce the contract. The court held that the plaintiffs' claim for civil conspiracy under Texas law failed for lack of evidence of conspiracy or any unlawful overt acts pursuant to the alleged conspiracy. As for the antitrust conspiracy, the court rejected Spectators's group boycott theory. The court held that the evidence did not show Anheuser-Busch had entered a combination with the intent to restrain competition in the market for advertising, and, in fact, such a claim would be nonsensical, since Anheuser-Busch would not rationally act to cause injury to purchasers of advertising, a class which includes Anheuser-Busch itself. The court concluded that no anticompetitive combination was shown by evidence that PGA conditioned the 19th Hole package on Anheuser-Busch's discontinuation of business with Spectators': "At best, Plaintiffs raise a fact issue regarding whether [Anheuser-Busch] decided not to engage in further business relations with [Spectators'] because it desired to engage in more lucrative business relations with others, and was concerned that its chances of securing the latter might be hampered by the former."(emphasis added). The court held that Spectators' evidence showed nothing more than competitive behavior by the defendants, and therefore Spectators' was injured by too much competition, not too little.

I.

We review the grant of...