Sports Racing Services, Inc. v. Sports Car Club of America, Inc.

• Decision Date: 28 October 1997
• Docket Number: No. 95-1411,95-1411
• Citation: 131 F.3d 874
• Parties: 1997-2 Trade Cases P 71,959, 97 CJ C.A.R. 2591 SPORTS RACING SERVICES, INC.; John K. Freeman, Plaintiffs-Counter-Defendants-Appellants, v. SPORTS CAR CLUB OF AMERICA, INC., Defendant-Appellee, and SCCA Enterprises, Inc., Defendant-Counter-Claimant-Appellee, and Donneybrooke Motor Racing Equipment, Inc., and Martin Downey Motorsports, Inc., Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 874

131 F.3d 874

1997-2 Trade Cases P 71,959, 97 CJ C.A.R. 2591

SPORTS RACING SERVICES, INC.; John K. Freeman Plaintiffs-Counter-Defendants-Appellants, v. SPORTS CAR CLUB OF AMERICA, INC., Defendant-Appellee and SCCA Enterprises, Inc., Defendant-Counter-Claimant-Appellee and Donneybrooke Motor Racing Equipment, Inc., and Martin Downey Motorsports, Inc., Defendants.

No. 95-1411.

United States Court of Appeals Tenth Circuit.

Oct. 28, 1997.

Glendon L. Laird and June Baker, White & Steele, P.C., Denver, CO, for Plaintiffs-Counterclaim-Defendants-Appellants.

F. Kelly Smith, Wheat Ridge, CO, for Defendant-Appellee and Defendant-Counter-Claimant-Appellee.

Before BRORBY and EBEL, Circuit Judges, and SAM, ^* District Judge.

EBEL, Circuit Judge.

Plaintiffs John K. Freeman and Sports Racing Services, Inc. ("SRS") brought this action alleging a variety of antitrust and contract-related claims. They appeal the district court's grant of summary judgment against them on their claims made against Sports Car Club of America, Inc. ("SCCA") and SCCA Enterprises, Inc. ("Enterprises"). ¹ We conclude that the district court erred in granting summary judgment as to several of the antitrust claims and therefore we affirm in part, reverse in part, and remand for further proceedings. ²

I. BACKGROUND

Because this appeal stems from grants of summary judgment, we present the facts in the light most favorable to plaintiffs. SCCA is a nonprofit organization that organizes and sanctions amateur sports car racing events for twenty-three classes of sports cars. The "Spec Racer" ³ and the "Shelby Can Am" are two of the classes sanctioned by SCCA. governing rules provide specific design and construction criteria for these two classes of cars and allow for virtually no variation. These rules require further that Spec Racer cars and parts be sold only by or through Enterprises, SCCA's wholly-owned, for-profit subsidiary, and that Shelby Can Am cars and parts be sold only through Shelby Technologies, who was not named as a defendant. Enterprises does not sell directly to the racing public, but instead sells only to a network of distributors or "customer service representatives" ("CSRs"). Thus, someone wanting to race in the Spec Racer or Shelby Can Am classes must purchase the authorized car and replacement parts from a CSR (or subdealer who purchased from a CSR).

John Freeman is a SCCA member who owns and races Spec Racers and Shelby Can Ams. ⁴ He is also the sole owner of SRS, which was a CSR for Spec Racers from January 1988 until early 1991 when Enterprises terminated it as a CSR. SRS was located in Indianapolis, Indiana, and served customers in a number of midwestern states. It sold Spec Racer cars and replacement parts, which it had purchased from Enterprises, to subdealers, racing teams, and drivers, including Freeman.

Freeman and SRS brought this action against SCCA and Enterprises alleging a variety of antitrust and other claims. ⁵ Their amended complaint asserts four antitrust claims. ⁶ For purposes of this appeal, Counts I and II are the most important. They are closely linked because both involve alleged anticompetitive activity in the sale of Spec Racer cars and parts resulting from defendants' control over both the races themselves and the cars and parts that can be used in the races. Count I is a claim of monopoly in the market for Spec Racer cars and parts in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. Freeman and SRS claim that defendants have monopolized this market by requiring that anyone wanting to race Spec Racers in races sanctioned by SCCA use cars and parts sold only by Enterprises to a CSR, such as SRS, for ultimate resale to a racer, such as Freeman. Defendants claim that the same cars and parts are available and could be obtained more cheaply on the open market than from Enterprises and that Enterprises does not make any meaningful modification to the products other than to put a label on them to indicate they were purchased from Enterprises. Plaintiffs contend that defendants' alleged monopolistic control over the market for these cars and parts prohibits the use of cheaper so-called "bandit" products--cars and parts not purchased from Enterprises--and thus allows defendants to overcharge both CSRs and racers for the cars and parts and to prohibit competition in this market.

Count II is a claim of illegal tying in the market for Spec Racer cars and parts in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Plaintiffs claim that defendants have illegally tied a racer's purchase of SCCA's racing services--that is, the ability to compete in SCCA-sanctioned Spec Racer races--to the purchase of cars and parts sold by Enterprises. Thus, the tying product is the racing services and the tied product is the cars and parts. As with their monopoly claim, plaintiffs contend that the tying arrangement forecloses competition in the cars and parts market, prevents racers from buying Spec Racer cars and parts on the open market, and forces racers to pay noncompetitive prices for such products.

Plaintiffs claim they have been injured in a variety of ways by these anticompetitive activities. Freeman claims he was injured as the sole shareholder of SRS because defendants' anticompetitive activity prevented SRS from competing in the relevant markets. He also claims that as a racer who purchased cars and parts, he was injured by having to pay illegal overcharges. SRS claims that it has been injured as follows: (1) by having to pay inflated prices as a CSR for cars and parts purchased from Enterprises; (2) by being unable to sell fiberglass body parts to Enterprises; (3) by being unable to consummate the sale of its business once its CSR agreement with Enterprises was terminated; and (4) by being prevented from competing in the relevant markets against Enterprises and other CSRs. ⁷

Plaintiffs also brought two other antitrust claims. Count III (by SRS only) is a claim of exclusive dealing and tying involving Spec Racers and Shelby Can Ams in violation of § 3 of the Clayton Act, 15 U.S.C. § 14. Count IV is a claim for monopoly in the market for Shelby Can Am cars and parts in violation of § 2 of the Sherman Act, 15 U.S.C. § 2, and is similar to Count I except that it pertains to Shelby Can Am cars rather than Spec Racer cars. Plaintiffs never developed either of these claims and have presented virtually no argument in the district court or this court regarding their standing to assert these claims, nor have they explained how the district court erred in dismissing these counts. We therefore conclude they have waived them and affirm the district court's dismissal of Counts III ⁸ and IV. ⁹

In addition to these antitrust claims, SRS brought three contract-related claims for violation of Indiana statutes governing franchises and for amounts due under several agreements with Enterprises.

After discovery, defendants moved for summary judgment on the antitrust claims on four grounds: (1) the claim under Count II for violation of § 1 of the Sherman Act is invalid because it failed to allege an agreement in restraint of trade; (2) Freeman lacked standing to sue under the antitrust laws; (3) SRS's claimed damages were too remote to be cognizable antitrust damages; and (4) any monopoly power defendants might have held was justified and therefore did not violate § 2 of the Sherman Act. Defendants also moved for summary judgment on the state law claims on the bases that SRS was not a franchisee under Indiana law and that SRS had not shown that it was owed any money under its agreements with Enterprises.

In granting summary judgment to defendants on the antitrust claims, the district court focused only on Freeman's standing and on SRS's antitrust injury and damages. Addressing Freeman's claims, the court first stated that he could not have standing based on his status as an SRS shareholder because antitrust violations that injure a corporation do not confer standing on a mere shareholder. Freeman does not contest this ruling on appeal. Next, the court determined that because Freeman was only an indirect purchaser from defendants, having purchased products from CSRs such as SRS but never directly from SCCA or Enterprises, Freeman did not have standing under the Supreme Court's three key cases in this area, Kansas v. UtiliCorp United, Inc., 497 U.S. 199, 110 S.Ct. 2807, 111 L.Ed.2d 169 (1990); Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977); and Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968).

Turning to SRS, the court concluded that its claims failed for lack of an antitrust injury because SRS benefitted from the defendants' restrictive conduct that it now claims violated the antitrust laws. That conduct shielded SRS from outside competition because purchasers from unauthorized suppliers of cars and parts could not qualify for sponsored races. Specifically, the court stated that

even if Enterprises and its CSRs engaged in an illegal tying of its racing services to the sale of race cars and component parts, that did not result in any injury to the CSRs, including SRS. Rather, it resulted in an assured market for Spec Racers and parts. Those consumers who wished to race in that class purchased cars and parts from the CSRs. The arrangement clearly benefitted the CSRs. In light of this, SRS has not presented a cognizable antitrust injury.

District Court Order and Memorandum of Decision at 11. The court then stated that even assuming SRS alleged an antitrust injury, the amount of the injury was too speculative because it presumed, incorrectly according to the court, that the demand for cars and parts was sensitive to prices and that sales, and corresponding profits, would increase if prices were lowered. Id. at 11-12.

The court next found that SRS's alleged inability to sell "approved" fiberglass body sections for the cars resulted...