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

• Decision Date: 17 October 1972
• Docket Number: Civ. No. 48234 TCC.
• Citation: 365 F. Supp. 235
• Court: U.S. District Court — Northern District of California
• Parties: TWIN CITY SPORTSERVICE, INC., a Missouri corporation, Plaintiff, v. CHARLES O. FINLEY & COMPANY, INC., an Illinois corporation; and Charles O. Finley, an Individual, Defendants. CHARLES O. FINLEY & COMPANY, INC., an Illinois corporation, Counter-Claimant, v. TWIN CITY SPORTSERVICE, INC., a Missouri corporation; and Sportservice Corporation, a New York corporation, Counter-Defendants.

365 F. Supp. 235

TWIN CITY SPORTSERVICE, INC., a Missouri corporation, Plaintiff, v. CHARLES O. FINLEY & COMPANY, INC., an Illinois corporation; and Charles O. Finley, an Individual, Defendants.

CHARLES O. FINLEY & COMPANY, INC., an Illinois corporation, Counter-Claimant, v. TWIN CITY SPORTSERVICE, INC., a Missouri corporation; and Sportservice Corporation, a New York corporation, Counter-Defendants.

Civ. No. 48234 TCC.

United States District Court, N. D. California.

September 29, 1972.

As Amended October 17, 1972.

COPYRIGHT MATERIAL OMITTED

Frederick P. Furth, John H. Boone, Thomas J. Gundlach, Geoffrey P. Knudsen, San Francisco, Cal., for plaintiff and counter-defendants.

Law Offices of Rothschild, Barry & Myers, William G. Myers, Alan L. Unikel, Chicago, Ill., Stark, Simon & Sparrowe, Stanley E. Sparrowe, Oakland, Cal., for defendants and counter-claimant.

AMENDED MEMORANDUM OF DECISION FINDINGS OF FACT AND AND CONCLUSIONS OF LAW

MR. JUSTICE CLARK^*:

This case was originally filed as a diversity action for the alleged breach of a concession contract and damages arising therefrom. Originally the contract was between Penn Sportservice, Inc. of Pennsylvania (PENN), a predecessor in interest of the plaintiff Twin City Sportservice, Inc. (TWIN CITY), and Connie Mack's American League Baseball Club of Philadelphia (PHILADELPHIA ATHLETICS). It was dated September 25, 1950, called for a 15-year term and provided that its terms were to be "unaffected by change of ownership." Penn paid the Philadelphia Athletics $150,000 cash, $100,000 for existing concession equipment, an agreement to loan $100,000 and to pay 29 percent on the gross receipts from a limited menu of concession items sold to spectators at all events, including home games of the Philadelphia Athletics, at Shibe Park. Two years later the contract was amended releasing the Philadelphia Athletics from repayment of the $100,000 previously paid for the existing concession equipment at the end of the term and providing that Penn make certain concession improvements. The term of the contract was enlarged to 25 years (a ten-year increase).

In 1954 the Philadelphia Athletics came under new ownership (Johnson) and were moved to Kansas City, Missouri, becoming the "Kansas City Athletics." In order to reduce the term of a lease held on Shibe Park, the 1950 contract was extended an additional 8 years and the concession followed the team to Kansas City under a "follow the franchise" claim.¹

In 1961 the defendant Charles O. Finley & Company, Inc. (FINLEY), acquired the Kansas City Athletics and, after the 1967 season, moved the team to Oakland, California, where it assumed the name of "Oakland Athletics." Finley took the position that it was not bound by the 1950 contract which still had 16 years of its term remaining. It began negotiating with Coliseum, Inc., the Oakland stadium authorities, regarding concession matters when this suit was filed. Twin City (successor to Penn) contends that Finley is bound by the 1950 contract until expiration on January 1, 1984. On application of Twin City, Judge Peckham issued a temporary injunction enjoining Finley from entering into any contract which would prejudice the rights of Twin City, subject to the final decision in this case. Since that time, conditioned as directed by the Court, Volume Service, a concessionaire of Seattle, Washington, has been performing at home games of the Oakland Athletics pursuant to its 1966 contract with Coliseum, Inc.

Subsequently, Finley filed a cross-action in this suit and impleaded Sportservice Corporation, a New York corporation (SPORTSERVICE)² and parent of Twin City, asserting that if Finley was bound by the 1950 contract — which it denied — that the contract violated the Federal antitrust laws. Finley also asserted a damage claim. On February 14, 1969, Judge Peckham ordered the case bifurcated and set the contract issue for trial, withholding the antitrust claim until after the contract issue was determined. In June, 1970, the case was assigned to the writer pursuant to his designation to sit in the Northern District. On August 24, 1970, the contract issue came on for hearing before the Court without a jury and testimony was heard for a week. On September 11, 1970, the Court found that there was an understanding that the concession contract would follow the franchise prior to Finley's purchase of the Athletics or, in any event, that Finley had ratified such an understanding and was now estopped from denying it.

During the hearing on the contract issue, the parties also developed from the witnesses appearing, facts concerning the anti-trust issue, and Finley offered some additional exhibits on its antitrust counterclaim and rested subject to proving up its damages. Twin City had requested an adjournment before going into the trial on the antitrust issue because of a previous setting of a protracted case in another Federal Court in which its attorneys were involved. In order to save the delay as well as the necessity of a further hearing, the Court suggested that Sportservice file offers of proof regarding its antitrust defenses, which was subsequently done. Under the offers the Court tentatively decided that the 1950 contract violated the Federal antitrust laws. However, after a hearing the Court at the request of Sportservice, on May 24, 1971, reopened the case for the hearing of further testimony. Sportservice took over 20 depositions, after which the trial was resumed on September 13, 1971. Unfortunately, the death of Mr. Justice Black and previous commitments brought about an adjournment on September 25 until October 22, after which the trial was concluded. Evidence had been received for 28 full trial days with almost 6000 pages of transcript and in excess of 800 exhibits. Subsequently, voluminous briefs, suggested findings, et cetera (all totalling over 500 pages) were filed and the case was taken under submission on February 1, 1972.³

1. Jurisdiction and Commerce:

There is no contest over jurisdiction, the parties acknowledging that the contract issue lies under 28 U.S.C. § 1332 and the antitrust ones are under 15 U. S.C. § 15 and § 22; and Sportservice concedes that the commerce involved in this suit is interstate commerce.

2. The Parties and Their Respective Businesses:

(a) Sportservice is engaged nationally in the sale of concession services for sporting events, et cetera, including the sale of food, refreshments, beverages, novelties and, in some instances, advertising, program printing, et cetera, at baseball, football, basketball, hockey, dog and horse racing and other spectator sporting events. The business originated with three brothers, Marvin, Louis and Charles Jacobs, and was known as Jacobs Brothers. It was originally limited to the sale of popcorn, et cetera, at the Academy Theater in Buffalo, New York where the brothers lived. However, it expanded to other cities and turned to baseball to gain an outlet during the summer when theaters were closed because of the hot weather. Their first baseball concession was in New Jersey, but by 1919 they were operating also in Buffalo and Baltimore. In 1930 they sold their first "big league" club, the Detroit Tigers, and in 1939 were successful in securing the concession at the Washington National Airport. In the early 1940's they expanded their business into racetracks and indoor sports arenas. At the close of World War II, Jacobs Brothers served some 100 minor league baseball clubs, three major ones (Detroit, Pittsburgh and Cincinnati), three indoor facilities and one racetrack. They then began their expansion into major league baseball. By 1961, out of a total of 15 clubs using outside services, Sportservice had ten of them; in 1971 it had ten⁴ clubs out of twenty-two American and National League franchises that use outside concessionaires. The terms of the contracts vary from ten years (Washington, D. C.) to a possible 100 years (Pittsburgh). In addition, Sportservice serves approximately 84 contracts at other sport facilities.⁵

In 1948 the brothers incorporated Sportservice Corporation which succeeded Jacobs Brothers. Originally the stock was distributed in equal shares between the brothers, but subsequently Louis Jacobs obtained the interest of Marvin and Charles and became the sole owner. Each of the concession contracts is serviced by a separate corporation — of which there are about one hundred — and they are owned or controlled by Sportservice Corporation which in turn is controlled by Emprise Corporation (EMPRISE) which for operating purposes serves as the parent corporation. Emprise owns the stock of Sportservice except for 5 percent which is in the Louis Jacobs estate. In addition to being the overall holding company for the system, Emprise also makes loans to baseball franchise owners, as well as other owners or operators of sports operations or facilities.

As has been indicated, the Sportservice system's concession contracts are serviced at spectator events in stadiums, arenas, racetracks (horse and dog), convention halls, auditoriums, theaters, airports, snack bars, airline-in-flight feeding and major expressway restaurants. The annual sales of the system exceed $103,000,000 annually, on which its profit is around 10 percent. Its baseball concessions run somewhat higher profits of 13 percent of aggregate gross sales. While it is disputed, there is also testimony that the Sportservice system is the largest concessionaire in the spectator events field in this country, if not in the world. Beyond question, it operates in more major league baseball parks, sports arenas and buildings and racetracks than any of its competitors.

(b) Finley is a comparative newcomer to the baseball world. It became the owner in 1961 of the old Connie Mack franchise of the American League of Professional Baseball Clubs, known as the Philadelphia Athletics. The purchase was after the Philadelphia Athletics had been moved to...