Twin City Sportservice, Inc. v. Charles O. Finley & Co., Inc.

• Court: U.S. Court of Appeals — Ninth Circuit
• Writing for the Court: Before DUNIWAY and ANDERSON, Circuit Judges, and KELLEHER; J. BLAINE ANDERSON; First, it deserves mention that Judge Peckham below expressly applied the rule of reason. After concluding that Sportservice's contracts demonstrated anticompetitive effec
• Citation: Twin City Sportservice, Inc. v. Charles O. Finley & Co., Inc., 676 F.2d 1291 (9th Cir. 1982)
• Decision Date: 10 May 1982
• Docket Number: 80-4233,Nos. 80-4196,s. 80-4196
• Parties: 1982-2 Trade Cases 64,768 TWIN CITY SPORTSERVICE, INC., a Missouri corporation, Plaintiff-counterdefendant-Appellant and cross Appellee. and Sportservice Corporation; a New York corporation, Counterdefendant-Appellant and Appellee. v. CHARLES O. FINLEY & COMPANY, INC., an Illinois corporation; Defendant-counterclaimant-Appellee and cross Appellant, and Charles O. Finley; Shirley M. Finley; Charles O. Finley, Jr.; Paul M. Finley; Sharon Kesling; and Kathryn Perlmutter, Defendants-Appellees cross Appellants.

Page 1291

676 F.2d 1291

1982-2 Trade Cases 64,768

TWIN CITY SPORTSERVICE, INC., a Missouri corporation Plaintiff-counterdefendant-Appellant and cross Appellee and Sportservice Corporation; a New York corporation Counterdefendant-Appellant and Appellee. v. CHARLES O. FINLEY & COMPANY, INC., an Illinois corporation Defendant-counterclaimant-Appellee and cross Appellant, and Charles O. Finley; Shirley M. Finley; Charles O. Finley, Jr.; Paul M. Finley; Sharon Kesling; and Kathryn Perlmutter, Defendants-Appellees cross Appellants.

Nos. 80-4196, 80-4233.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 14, 1981.

Decided May 10, 1982.

John P. Frank, Phoenix, Ariz., for Twin City Sportservice, Inc.

William G. Myers, Chicago, Ill., for Charles O. Finley & Co., Inc.

On Appeal from the United States District Court for the Northern District of California.

Before DUNIWAY and ANDERSON, Circuit Judges, and KELLEHER, District Judge. ^*

J. BLAINE ANDERSON, Circuit Judge:

I. INTRODUCTION

This litigation began in 1967 when Twin City Sportservice, Inc. (Sportservice) ¹ filed suit against Charles O. Finley & Company, Inc. (Finley), ² seeking relief from Finley's alleged breach of its 1950 concession contract with Sportservice. Finley counterclaimed against Sportservice and its parent corporation, Sportservice Corporation (Sportservice), and alleged that the contract violated sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. The contractual issues have long been decided in favor of Sportservice; however, issues involving the antitrust defense and counterclaims, twice decided in Finley's favor, are presently before this court for the second time.

The contractual and antitrust issues were originally bifurcated for trial before Justice Clark with Sportservice prevailing on its contract claims by judgment in 1970, and Finley prevailing on the antitrust defense and counterclaims in 1972. See Twin City Sportservice, Inc. v. Charles O. Finley & Co., 365 F.Supp. 235, 237-38 (N.D.Cal.1972). Sportservice appealed, and this court reversed Justice Clark's determinations of antitrust liability, remanding for the purpose of receiving new evidence directed toward the definition of the relevant market. See Twin City Sportservice, Inc. v. Charles O. Finley & Co., 512 F.2d 1264 (9th Cir. 1975) (Finley I ). Upon remand, the district court (per Judge Peckham) received additional evidence regarding the relevant market pursuant to this court's instructions in Finley I, and again found for Finley on its antitrust claims. Sportservice now appeals from Judge Peckham's judgment for Finley, and Finley cross-appeals for application of interest from the date of Justice Clark's first judgment and for an increased attorney's fee award. In his last memorandum and order addressed to this litigation, Judge Peckham remarked, "We now conclude what should be the denouement in a long and tangled story." Shortly thereafter, that optimistic prediction of finality was frustrated by the present appeal. Although we reverse on issues regarding interest and attorney fees, our affirmance of Judge Peckham's findings and conclusions of antitrust liability compels us to affirm his additional conclusion that this indeed should be the denouement in this long and tangled story.

II. RELEVANT MARKET

A. Prior Proceedings

The protracted history of this litigation is due in large measure to the parties' dispute over the relevant market. At the first trial, Justice Clark concluded that the relevant market consisted of "major league baseball concessions." 365 F.Supp. at 245. ³ This court rejected such a market on prior appeal for basically two reasons: (1) it erroneously focused upon the concessionaire as the seller of concession services and the baseball club or facility as the buyer-rather than considering the concessionaire as the buyer of a concession franchise and the baseball club or facility as the seller of such a franchise, and (2) it was erroneous in scope in that it was limited to concession franchises associated with major league baseball, excluding other franchises associated with other facilities and events. Finley I, 512 F.2d at 1272. However, our rejection of Justice Clark's market was accompanied with instructions to the district court on remand. Inter alia, the district court was instructed that:

"(T)he relevant market with which we are concerned here is one in which the articles of commerce are franchises, not concession services....

....

... (A) concessionaire is a buyer in the franchise market and a seller in the concession market....

....

It follows that the relevant franchise market cannot be limited to those offered for sale by major league baseball teams....

....

... The franchise market with which the trial court should be concerned on remand of this case is that which envisions the sale by the concessionaire of a limited range of concession items to spectators in a closed area, either by vendors, stands, or both, where the preparation requires at most a grill and not a kitchen. The leisure time activities with respect to which franchises within the relevant market are available are undoubtedly numerous. They may include all or a substantial number of the following: viz., football, basketball, hockey, soccer, boxing, racing, track and field, rodeos, circuses, and music festivals. Likewise the sellers of such franchises may include professional teams, sports organizations and public and private operators of stadiums, arenas, race tracks, convention centers and amusement parks."

In summary, this court furnished the district court with two additional guidelines:

"We conclude these guides to the trial court by observing that in establishing the relevant franchise market the trial court (1) should apply the test of reasonable interchangeability and (2) should treat the leisure time activity or facility manager as the seller of the franchise and the concessionaire as the purchaser."

512 F.2d at 1272-74.

With this guidance, the district court, on remand (per Judge Peckham), received additional evidence and found a new relevant market by performing a two-part analysis. The court remarked:

"In sum, the task which emerges from these guidelines has two steps. First, the court must determine what facilities, considered in terms of the techniques and skills of their concession operations, are reasonably interchangeable with major league baseball franchises. This substitutability of production in the concession products market defines the outer limits of the franchise market. Second, the court must determine which franchises within these outer boundaries are found by national concessionaires to be reasonably interchangeable in use."

March 31, 1977 Memorandum and Order, at 7-8.

The result of the district court's first step, an analysis of substitutability of production in the concession products market, defined the broad "outer limits" of the possible market as consisting of "stadiums with major league baseball and/or football, arenas with major league basketball and/or hockey, arenas without major league sports, auto racing tracks, and certain amusement parks." ⁴ March 31, 1977 Memorandum and Order, at 11. The result of the second step, an analysis of the substitutability of use in the concession franchise market, yielded a total of 118 possible concession franchises within the relevant market. Of that number, the district court below found that Sportservice controlled 24 percent. ⁵

B. Arguments on this Appeal

Sportservice attacks the post-remand definition of the relevant market on many specific fronts, but its general argument is that the district court, on remand, failed to adhere to this court's instructions in Finley I. Sportservice reads our instructions as explicitly defining the types of facilities and categories of events that should be included in the relevant market, leaving the district court with the sole obligation of finding the correct numbers. Finley, on the other hand, reads this court's instructions on prior appeal as more general guidelines fully supporting the district court's actions in finding the new relevant market. We agree with Finley.

On prior appeal, we reversed and remanded because a market limited only to major league baseball concession franchises was deemed too narrow. We instructed the district court to supplement the record with evidence of concession franchises that were reasonably interchangeable with the type of franchise serving major league baseball teams. This court intended for the district court to resume its inquiry into the possible addition of concession franchise opportunities which would comprise a more reasonable relevant market under the facts of this case. Our prior opinion did not specifically define the types of events and facilities in the relevant market, nor did it determine the number. Our prior decision stated only that a focus on major league baseball was too narrow, that that focus had resulted from Justice Clark's emphasis upon the market for the sale of concession services rather than the concession franchise market as the relevant line of commerce, and from his failure to examine the franchise market for which reasonable interchangeability among concessionaires like Sportservice existed.

Sportservice appears to have little difficulty with the district's court's initial narrowing of the concession franchise market performed by the first step of finding those concession franchises for which substitutability of production in the concession products market exists. Such a narrowing is proper. Calnetics Corp. v. Volkswagen of America, Inc., 532 F.2d 674, 691 (9th Cir.), cert. denied, 429 U.S. 940, 97 S.Ct. 355, 50 L.Ed.2d 309 (1976). Sportservice does take issue with the district court's second narrowing-the determination of reasonable interchangeability in use or demand by national concessionaires among the concession opportunities left after the first...