Turf Paradise, Inc. v. Arizona Downs
| Decision Date | 26 February 1982 |
| Docket Number | No. 80-5185,80-5185 |
| Citation | 670 F.2d 813 |
| Parties | 1982-1 Trade Cases 64,460 TURF PARADISE, INC., an Arizona corporation, Plaintiff-Appellant, v. ARIZONA DOWNS, an Arizona corporation, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
David L. White, Phoenix, Ariz., for plaintiff-appellant.
Roger T. Hargrove, Phoenix, Ariz., argued, for defendant-appellee; Elias M. Romley, Phoenix, Ariz., on brief.
Appeal from the United States District Court for the District of Arizona.
Before WRIGHT, SNEED, and POOLE, Circuit Judges.
Turf Paradise, Inc. (Turf), an Arizona corporation that owns and operates the Turf Paradise race track in Phoenix, Arizona, filed this private antitrust action against Arizona Downs (Downs), an Arizona corporation that leases and operates the Turf Paradise track for half of the racing season, alleging violation of section 1 of the Sherman Act, 15 U.S.C. § 1, and sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26. Turf contended that a provision of the lease between Turf and Downs that sets forth the manner in which Turf and Downs The district court on November 16, 1979 granted Downs' motion for partial summary judgment finding that Turf, as an original participant to the two-party agreement, was barred from receiving damages under the defense of in pari delicto. On the same date the district court denied Turf's motion for partial summary judgment which sought to have declared the date allocation provisions in the lease void as a per se violation of the Sherman Act. Thereafter, on January 28, 1980, the district court invoked the abstention doctrine and dismissed the action in deference to a prior filed state action brought by the Arizona Horsemen's Foundation, Inc. (AHF), challenging the same lease on the grounds that the exclusivity clause of the lease violates the Arizona antitrust laws, and that the preferences given existing holders of racing permits under Arizona law violates equal protection. The district court's dismissal of January 29, 1980 can be read as also relying upon the antitrust immunity provided by Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). Turf timely appeals both the grant of partial summary judgment and the dismissal.
will apply to the Arizona Racing Commission for racing dates is a horizontal restraint of trade among competitors and, consequently, a per se violation of the federal antitrust laws. Turf sought declaratory and injunctive relief, as well as damages, costs, and attorney's fees.
We affirm both actions of the district court on grounds somewhat different than those articulated by that court. That is, we hold that the date allocation provisions are not a per se violation of the Sherman Act and that, should we be in error in this respect, the provisions are immune from attack under Parker v. Brown, supra. In so holding, we reject the contentions of Downs that the district court lacked subject matter jurisdiction and that, if jurisdiction existed, the district court properly abstained from exercising it. We refrain from deciding other issues raised by the parties.
Turf and Downs have both been engaged in the business of conducting horse racing meetings in Maricopa County, Arizona for a number of years. Prior to 1954 both Turf and Downs (then operating under its predecessor name of Ingleside Turf Club) each had its own race track. At the time Turf was planning to build a new track and Downs was planning to enlarge its existing facility. In 1954 both parties applied to the Arizona Racing Commission for permits to hold racing meetings on some of the same days, thus resulting in a conflict that the Arizona Racing Commission was going to have to resolve. Litigation resulted from this conflict. On September 20, 1954, Turf wrote to Downs suggesting that "a direct conflict in racing dates exist(ed and that that resulted in a condition that was) very detrimental to the better interests of racing and (could) only lead to confusion and an inferior type of horse racing." In order to avoid "this undesirable situation," Turf proposed that Turf and Downs divide use of Turf's soon to be completed race track-the present Turf Paradise facility. A copy of this letter was delivered to the Arizona Racing Commission.
In 1956 the Arizona Legislature enacted Ariz.Rev.Stat. § 5-108.01, effective July 14, 1956, that provided a regulatory method for settling conflicts in applications for racing dates within the same county. It defined a conflict as any time "two or more applications (seek) racing permits to conduct racing on the same day or dates within the same county." Ariz.Rev.Stat. § 5-108.01(A). It further provided that when a conflict existed, "applicants shall attempt to resolve such conflict by an agreement in writing in which agreement each such applicant shall receive and be allocated dates in such manner as will eliminate such conflict." Ariz.Rev.Stat. § 5-108.01(B). Such agreements were to be filed with the Arizona Racing Commission and the Commission would hold hearings to allocate the days only in the event that an agreement could not be reached. Ariz.Rev.Stat. § 5-108.01(B) & (C).
On October 9, 1956, after the effective date of section 5-108.01, Turf and Downs signed a twenty-year lease, granting a leasehold interest to Downs for use of the Turf Paradise track for one-half of the racing season. The lease also contained two twenty-year option periods, the first of which was exercised by Downs in 1976. The lease contains the following provision that is the subject of the present controversy:
The parties hereto recognize that heretofore the total racing dates legally available to the parties hereto have been applied for and allocated substantially equally between (Turf) and (Downs), or the (sic) predecessors. The parties hereto agree that during the term of this agreement the total number of racing dates legally available to the parties hereto in a racing season shall be divided equally, one-half (1/2) thereof to (Turf) and one-half (1/2) thereof to (Downs). The term "racing season" as used herein means that period of time beginning with the first day allocated by the Arizona Racing Commission at its meeting each year for horse racing at (Turf's) racing plant and ending with the last day so allocated.
The parties hereto agree that unless they otherwise mutually agree, they will alternate each year in applying for the racing days in the first half and in the last half of each racing season, with (Turf) to apply only for the racing days in the first half of the next racing season beginning after July 1, 1957, and (Downs) to apply only for the racing days in the last half of said racing season.
The 1956 version of section 5-108.01 dealing with conflicts in racing dates was repealed in 1968. Section 5-110(A) was adopted to replace it and provided that when a conflict existed, current holders of permits would be given preference for those dates they had had permits for in previous years. It specifically recognized that if there was an agreement among different applicants calling for them to alternate racing dates, the holders of permits would receive preference over other applicants in accordance with the alternating provisions of the agreement. Ariz.Rev.Stat. § 5-110(A) (West 1974 & Supp. 1980-81).
Aside from the above-mentioned statutory provisions, horse racing is subject to considerable regulation in Arizona. The Arizona Racing Commission is empowered to, inter alia, issue racing dates, regulate and supervise all racing meetings, inspect racing sites, promulgate regulations governing racing meetings to promote "public health, safety, and proper conduct of racing and pari-mutuel wagering," and supervise pari-mutuel racing. Ariz.Rev.Stat. § 5-104 (West 1974 & Supp. 1980-81). Permit applications must include a statement of the location at which and dates on which the racing meetings are to be held, as well as a statement as to whether the plant is leased or owned. Ariz.Rev.Stat. § 5-107 (West 1974 & Supp. 1980-81). A permit is necessary to hold a racing meeting, and a permit will only be issued to an owner or a lessee of a racing track. Ariz.Rev.Stat. §§ 5-107.01 and 5-107.02 (West 1974 & Supp. 1980-81). The Commission is required to "conduct a thorough investigation concerning an application for a permit," and may refuse to issue a permit if such refusal is warranted based on a review of the applicant's moral character, if issuing the permit is not in the "best interest of the safety, welfare, economy, health and peace of the people of the state," or for other enumerated reasons. Ariz.Rev.Stat. § 5-108 (West 1974 & Supp. 1980-81). However, if the applicant meets the requirements for the issuance of a permit, it shall be issued. Ariz.Rev.Stat. § 5-108(C) (West 1974 & Supp. 1980-81). No new racing permits shall be issued after February 1, 1971 unless the Commission determines that issuance of the permit is in the public interest, is economically feasible, and in the best interest of horse racing. Ariz.Rev.Stat. § 5-108.01 (West 1974 & Supp. 1980-81). All challenges to the issuance, or failure to issue, a new permit are to be made in the Superior Court of Maricopa County. Ariz.Rev.Stat. § 5-108.01(B) (West 1974 & Supp. 1980-81). Finally, both the number of permits that a single entity can own in the state and in the largest counties are limited, and the number of racing days allowed in a particular year, are (1) A third racing entity, AHF, has applied to the Commission for a permit to conduct racing meetings at the Turf Paradise track on those days for which the track is now leased to Downs. AHF, as already noted, filed a state court action, prior to the filing of the instant action, claiming state antitrust violations resulting from the current lease agreement between Turf and Downs because of the...
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