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

• Decision Date: 21 February 1975
• Docket Number: Nos. 73-1126,73-1585,s. 73-1126
• Citation: Twin City Sportservice, Inc. v. Charles O. Finley & Co., Inc., 512 F.2d 1264 (9th Cir. 1975)
• Parties: 1975-1 Trade Cases 60,195 TWIN CITY SPORTSERVICE, INC., a Missouri Corporation, and SPORTSERVICE CORPORATION, a New York Corporation, Appellants, v. CHARLES O. FINLEY & COMPANY, INC., an Illinois Corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1264

512 F.2d 1264

1975-1 Trade Cases 60,195

TWIN CITY SPORTSERVICE, INC., a Missouri Corporation, and SPORTSERVICE CORPORATION, a New York Corporation, Appellants, v. CHARLES O. FINLEY & COMPANY, INC., an Illinois Corporation, Appellee.

Nos. 73-1126, 73-1585.

United States Court of Appeals Ninth Circuit.

Feb. 21, 1975.

John P. Frank, of Lewis & Roca (argued), Phoenix, Ariz., for appellants.

William G. Myers, of Rothschild, Barry & Myers, Chicago, Ill. (argued), for appellee.

OPINION

Before TRASK and SNEED, Circuit Judges, GRAY, ^* District Judge.

SNEED, Circuit Judge:

This is an appeal from a trial court judgment awarding treble damages, attorney's fees and costs to appellee-counterclaimant Charles O. Finley & Company, Inc. (Finley) on the ground that a 1950 contract between the then-owner of the Athletics baseball team and a predecessor in interest of appellant Twin City Sportservice, Inc. (Sportservice) violated §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. Sportservice initiated the suit against Finley in 1967, alleging breach of contract by the latter, and seeking declaratory, injunctive, and monetary relief. Finley filed a counterclaim, charging antitrust violations, and joined Sportservice Corporation, the parent of Sportservice. Jurisdiction was based, in the contract action, upon 28 U.S.C. § 1332 and, on the antitrust claims, upon 15 U.S.C. §§ 15 and 22.

The dispute which culminated in this litigation finds its origins in a concession franchise contract signed September 25, 1950, the parties to which were Penn Sportservice, Inc. (Penn), a predecessor in interest of Sportservice, and the American League Baseball Club of Philadelphia (the then-owner of the Philadelphia Athletics baseball club), which in turn was owned by Connie Mack. The latter also owned Shibe Park (Connie Mack Stadium) where the Athletics' home games were played. At the time the contract was negotiated the Athletics had just concluded the baseball season with a losing record and were experiencing financial problems. On August 28, 1950 Mack had arranged to borrow $1,750,000 from the Connecticut General Life Insurance Company and in return gave a first mortgage on the stadium and agreed to assign his share of concession receipts as security.

The 1950 contract with Penn produced an additional source of revenue for the Athletics. By its terms Penn obtained a fifteen-year exclusive concession franchise for all events at Shibe Park, which was to be "unaffected by change of ownership" for whatever reason. For its part, Penn advanced the team the sum of $150,000 and agreed to pay them 29% of its gross concession receipts and 35% of its advertising receipts, guaranteeing certain minimum payments. Penn also purchased the existing concession equipment at the stadium for $100,000, subject to an obligation on the part of the team to repurchase it for a like sum under certain conditions, and agreed to loan the Athletics an additional $100,000 in the future.

The contract was amended on July 1, 1952 to terminate any obligation of the team to repay the $100,000 equipment purchase price and in return the franchise was extended by ten years. In 1953, in order to secure a loan from Penn, the Athletics confirmed by letter that if the team should move, the concessionaire would "follow the franchise," i. e., the Sportservice franchise would continue both at Shibe Park and at any new location of the club.

The Athletics changed hands in 1954 and when Arnold Johnson, the new owner, moved the team to Kansas City shortly thereafter, Penn's concession franchise right travelled with it under the follow-the-franchise provision. Johnson also decided to sell Shibe Park to the Phillies ball club and in order to facilitate the transaction, arranged to reduce the remaining term of the Penn franchise at the stadium by eight years and in turn, to extend the duration of the concession agreement with the Athletics by the same period. At that time Penn assigned its franchise right under the contract-which now ran for 33 years-to Sportservice and the latter undertook the concessions operations in Kansas City.

In 1961 Charles O. Finley & Company acquired ownership of the Kansas City Athletics, and Sportservice continued its concessions operations through the end of the 1967 baseball season, when Finley moved the team to Oakland, California. Sportservice, on the basis of the follow-the-franchise provision, insisted that its concession franchise was not terminated by the move; Finley, however, countered that it was not bound by the 1950 agreement. In 1968 another concessionaire, Volume Service Company, commenced operations at the Athletics' home games pursuant to a 1966 contract with Coliseum, Inc., the Oakland stadium authorities.

Sportservice filed suit, claiming that Finley is bound by the 1950 contract. Finley denied this and argued that the terms of the contract violated §§ 1 and 2 of the Sherman Act. The case was bifurcated into contract and antitrust segments and trial on the latter claim awaited resolution of the former. At the conclusion of trial on the contract issue 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." Twin City Sportservice, Inc. v. Charles O. Finley & Co., Inc., 365 F.Supp. 235, 238 (N.D.Cal.1972). Thus Finley would be bound by the 1950 contract and liable to Sportservice for damages for breach unless it prevailed on the antitrust counterclaim in the subsequent trial. There, the court found that the counterdefendants had violated §§ 1 and 2 of the Sherman Act and that Finley had been proximately injured thereby in the amount of $282,168, to be trebled. This appeal followed. We reverse and remand for further proceedings.

We shall first discuss whether Finley's antitrust claims are barred by limitations. Next we shall discuss the trial court's holdings that Sportservice properly was guilty of actual monopolization and restraint of trade pursuant to Sections 2 and 1, respectively, of the Sherman Act. Thereafter we shall consider the trial court's conclusion, which it considered unnecessary to its judgment, that Sportservice engaged in a tying arrangement constituting a per se violation of § 1 of the Sherman Act. To conclude this opinion, we shall consider the trial court's holding that Sportservice, contrary to § 2 of the Sherman Act, attempted to monopolize. Throughout this opinion, for convenience, all actions taken by Sportservice's predecessor in interest, Penn, are attributed to Sportservice.

I.

Limitations

Certain defenses to Finley's counterclaim were raised in the Sportservice brief that were not pressed upon the trial court. In view of our disposition of this case we feel it necessary to deal only with the assertion by Sportservice that Finley's treble damage action is barred under 15 U.S.C. § 15b, which provides that such actions are "forever barred unless commenced within four years after the cause of action accrued." A civil cause of action under the Sherman Act arises at each time the plaintiff's interest is invaded to his damage, and the statute of limitations begins to run at that time. Suckow Borax Mines Consol., Inc. v. Borax Consol., Ltd., 185 F.2d 196, 208 (9th Cir. 1950), cert. denied 340 U.S. 943, 71 S.Ct. 506, 95 L.Ed. 680 (1951). Sportservice argues that Finley's suit is barred because it was not filed within four years of the last allegedly damaging act, the amendment or extension of the contract to its complete 33-year duration in 1954. This argument overlooks the necessarily continuing nature of the alleged harm. As the Supreme Court stated in Hanover Shoe, Inc. v. United States Mach. Corp., 392 U.S. 481, 502 n. 15, 88 S.Ct. 2224, 2236, 20 L.Ed.2d 1231 (1968),

"We are not dealing with a violation which, if it occurs at all, must occur within some specific and limited time span. (Citation omitted.) Rather, we are dealing with conduct which constituted a continuing violation of the Sherman Act and which inflicted continuing and accumulating harm .."

Thus the fact that the final amendment to the contract was made in 1954 does not preclude Finley from bringing suit in 1968. To hold otherwise is to say that some damage that might have been sustained was barred before it accrued. Highland Supply Corp. v. Reynolds Metals Co., 327 F.2d 725, 732 (8th Cir. 1964).

II. Actual Monopolization

There are two prerequisites to a showing of actual monopolization under § 2 of the Sherman Act, "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1704, 16 L.Ed.2d 778 (1966); Case-Swayne Co. v. Sunkist Growers, Inc., 369 F.2d 449, 458 (9th Cir. 1966), rev'd on other grounds, 389 U.S. 384, 88 S.Ct. 528, 19 L.Ed.2d 621 (1967). If the first element is absent the analysis need proceed no further.

Monopoly power is the power to control prices or exclude competition. United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377, 391, 76 S.Ct. 994, 100 L.Ed. 1264 (1956); Lessig v. Tidewater Oil Co., 327 F.2d 459, 474 (9th Cir.), cert. denied 377 U.S. 993, 84 S.Ct. 1920, 12 L.Ed.2d 1046 (1964). Since "size is of course an earmark of monopoly power," United States v. Griffith, 334 U.S. 100, 107 n. 10, 68 S.Ct. 941, 946, 92 L.Ed. 1236 (1948), the existence of such power ordinarily may be inferred from the predominant share of the market. United States v. Grinnell Corp., supra, 384 U.S. at 571, 86 S.Ct. 1698; Jack Winter, Inc. v. Koratron Co., Inc., 375 F.Supp. 1, 68 (N.D.Cal.1974).

Therefore, to determine whether a party has monopoly power it is essential first to...