Toscano v. Pga Tour, Inc.

• Decision Date: 12 October 1999
• Docket Number: No. CIVS-97-1238 DFL PAN.,CIVS-97-1238 DFL PAN.
• Citation: 70 F.Supp.2d 1109
• Court: U.S. District Court — Eastern District of California
• Parties: Harry TOSCANO, Plaintiff, v. PGA TOUR, INC., et al., Defendants.

70 F.Supp.2d 1109

Harry TOSCANO, Plaintiff, v. PGA TOUR, INC., et al., Defendants.

No. CIVS-97-1238 DFL PAN.

United States District Court, E.D. California.

October 12, 1999.

Thomas August Casazza, Law Offices of Thomas Casazza, Sacramento, CA, for Harry Toscano, plaintiff.

Pamela J. Palmieri, Littler Mendelson, Sacramento, CA, William J. Maledon, Diane M. Johnson, Osborn Maledon, Phoenix, AZ, Cary M. Adams, Murphy Austin Adams Schoenfeld, LLP, Sacramento, CA, for Jim Colbert, Defendant.

William J. Maledon, Diane M. Johnson, Phoenix, AZ, Cary M. Adams, Murphy Austin Adams Schoenfeld, LLP, Sacramento, CA, for Bruce Devlin, Terry Dill, Dale Douglas, Raymond Floyd, Gibby Gilbert, Bob Goalby, Mike Hill, Ken Still, American Express Co., a New York corp., Ameritech Corp., a Delaware corp., Bank-Boston Corp., Banc One Corp., an Ohio corp., Country-Wide Credit Industries, Inc., a Delware corp., FHP Health Care, Franklin Quest Co., a Utah Corp., Hyatt Corp., LG Group, Paine Webber Group, Inc., a Delaware corp., Raley's, Ralph's Grocery Co., SBC Communications, Inc. a Delaware corp., The Scotts Co., an Ohio corp., TrueGreen-Chemlawn, PGA Tours, Inc., Dave Stockton, Deane R. Beman, Timothy W. Finchem, Defendants.

William J. Maledon, Diane M. Johnson, Phoenix, AZ, for Bellsouth Corp., a Georgia Corp., Defendent.

Will Barnett Fitton, Latham and Watkins, San Francisco, CA, William J. Maledon, Phoenix, AZ, Cary M. Adams, Murphy Austin Adams Schoenfeld, LLP, Sacramento, CA, William B. Slowey, General Motors Corp., Detroit, MI, for General Motors Corp., a Delaware corp.

Pamela J. Palmieri, Littler Mendelson, Sacramento, CA, William J. Maledon, Phoenix, AZ, Cary M. Adams, Murphy Austin Adams Schoenfeld, LLP, Sacramento, CA, for GTE Corp., a New York corp.

William J. Maledon, Phoenix, AZ, Cary M. Adams, Murphy Austin Adams Schoenfeld, LLP, Sacramento, CA, for Nationwide Ins. Enterprises, a Business Entity, Ojai Golf Charities, a California nonprofit corp., Centinela Hospital Medical Center, Defendants.

William J. Maledon, Diane M. Johnson, Phoenix, AZ, Cary M. Adams, Murphy Austin Adams Schoenfeld, LLP, Sacramento, CA, for Royal Carribean Cruise Line, Toshiba Corp., Transamerican Corp., a Delaware Corp., Gold Rush Classics, a California nonprofit corp., Classic Charities of Orange County, a California non-profit corp., Grand Slam Charities, an Ohio nonprofit corp., Defendants.

MEMORANDUM OF OPINION AND ORDER

LEVI, District Judge.

Plaintiff Harry Toscano brings this action against the PGA Tour, Inc. ("the Tour"), the individual officers and directors of the Tour, and various sponsors of the Tour's golf tournaments, alleging that they conspired to restrain trade in senior professional golf in violation of Section One of the Sherman Antitrust Act, 15 U.S.C. § 1. The sponsor defendants move for summary judgment.

I.

The Senior PGA Tour co-sponsors professional golf tournaments for players over the age of 50. (March 23, 1998 Mem. of Op. & Order at 1.) Toscano challenges the Tour's regulations governing (1) player eligibility, and (2) player participation in non-PGA events.

The Tour's Rules and Regulations provide for a 78-player field for each tournament. A player is exempt from having to compete in the qualifying rounds of the tournament if he has secured 75 or more victories in Senior PGA or PGA Tour events or is within any of the following categories: (1) the top 31 available players from the previous year's Tour Money List; (2) the top 31 available players from the All-Time Career Money List (which includes purses won both in Senior PGA Tour tournaments and in PGA tournaments); (3) the top eight players from the Tour's annual National Qualifying Tournament (in order of finishing); (4) players who have won a Tour tournament within the past 12 months; (5) the top four scorers in the qualifying round of play held before the tournament at issue; (6) four players designated by the tournament's local sponsor; and (7) on a space available basis, any otherwise non-exempt player who has won a Senior PGA Tour or PGA Tour tournament. (Moorhead Decl. ¶ 9; Pl.'s App. 1 at 5-9.)

The Rules and Regulations also restrict the ability of Tour members to participate in non-Tour events. Under the "Conflicting Events" Rule, a player who qualifies to play in a Tour event generally may not enter a non-Tour tournament scheduled on the same date unless he first obtains a written release from the Tour Commissioner.¹ (Pl.'s App. 1 at 25.) The Commissioner has discretionary authority to grant a Tour member two releases annually, assuming he participates in 15 Tour events, and an additional release for every five Tour events in which he participates above 15. (Id. at 26.) The Commissioner may deny a Tour member's request for a waiver if he determines that it "would cause [the] Tour to be in violation of a contractual commitment to a tournament or would otherwise significantly or unreasonably harm [the] Tour and such tournament." (Id.) Moreover, under the "Television Release" or "Media Rights" Rule, Tour members must also seek the Commissioner's approval before participating in a televised tournament that is not cosponsored or approved by the Tour, irrespective of whether the tournament conflicts with a Tour event. (Id. at 27-28.)

The Rules and Regulations governing the Senior PGA Tour are controlled by the Tour's Division Board (the "Board"). (Pl.'s App. 1 at 48.) The Board is comprised of four Player Directors, the immediate past President of the PGA, and four Independent Directors, defined as "four public figures with a demonstrated interest in the game of golf." (Id. at 45.) Player Directors are elected by voting members of the Tour, and hold office for a period of two years. (Id.) Any amendment to the Rules and Regulations must be approved by a majority of the Board, including three Player Directors, unless a conflict of interest exists.² Amendments adopted by the Board may be reversed by a two-thirds vote of all voting members of the Tour.

Although no representative of the sponsor defendants is or has been a member of the Board, (Moorhouse Decl. ¶ 14), Toscano contends that the sponsor defendants conspired with the Tour to perpetuate and enforce the Rules and Regulations he challenges. Tour sponsors fall into two rough categories: "local sponsors" and "title sponsors." Local sponsors are nonprofit or charitable organizations that contract directly with the Tour. (Id. ¶ 3.) Local sponsors serve as the principal organizers of Tour events, and are responsible for reserving a golf course that meets Tour specifications, hiring and paying staff for the tournament, amassing the tournament prize money, advertising and promoting the event, and arranging for the sale of concessions. (Id. ¶ 4.) In order to cover the cost of organizing and operating the tournament, local sponsors in turn enter into agreements with title sponsors — businesses who pay for the right to advertise in connection with the tournament. (Moorhouse Decl. ¶ 5.) The local sponsor typically agrees to organize and conduct the tournament in accordance with PGA Rules and Regulations, incorporate the title sponsor's name into the Tournament title, display signage with the title sponsor's name at the tournament site, provide hospitality benefits at the tournament, and secure national television and print media advertising. (E.g., Defs.' App. 7, 9, 10.) In return, the title sponsor generally makes payments under a fixed schedule, or assumes financial responsibility for a significant portion of the Tournament purse and television and advertising costs.³ (Id. 7, 8, 9, 10, 11.)

The organization of the Ralphs Senior Classic tournament illustrates the relationships among local sponsors, title sponsors, and the Tour. The local sponsor, defendant Centinela Hospital Medical Center ("Centinela"), entered into a contract directly with the PGA to organize and run a golf tournament in Los Angeles, California. The agreement provides that "[t]he general division of duties will be that [Centinela] will provide the course, the clubhouse, and all other facilities of every kind necessary or appropriate for professional golf competition, and PGA Tour, with the assistance of [Centinela], will conduct the competition." (Def.'s App. 3 at CH-00014.) Centinela in turn entered into a title sponsorship with Ralphs. In exchange for a series of payments to Centinela, Ralphs secured advertising and media rights in connection with the tournament, including the right to have its name included in the tournament's title (hence, "The Ralphs Senior Classic") and to use the tournament logo in its advertisements. (Def.'s App. 15 at RG-00054, 00060).

II.

Section One of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce." 15 U.S.C. § 1. This phrase "has been interpreted to require concerted action of more than a single entity." The Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148, 1152 (9th Cir.1988).

The Sponsor defendants argue that there is no triable issue of fact as to whether they and the Tour engaged in concerted anticompetitive action in violation of § 1.⁴ Because the local sponsor defendants and title sponsor defendants have somewhat different relationships with the Tour, they are discussed separately below.

A. Local Sponsors

Defendants maintain that under the Supreme Court's decision in Monsanto v. Spray-Rite Serv. Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984), the local sponsors' dealings with the Tour do not rise to the level of concerted action within the meaning of § 1. The court agrees.

In Monsanto, the Court affirmed the right of a manufacturer to announce the terms under which it will deal with distributors and then refuse to deal with those unwilling to accept its terms. The Court explained that a conspiracy between a manufacturer and its distributors could not be inferred from mere compliance...