VOLVO NORTH AMER. v. MEN'S INTERN. PRO. TEN. COUN.

• Decision Date: 10 August 1987
• Docket Number: No. 85 Civ. 2959 (KTD).,85 Civ. 2959 (KTD).
• Citation: 678 F. Supp. 1035
• Parties: VOLVO NORTH AMERICA CORPORATION, International Merchandising Corporation, and Proserv, Inc., Plaintiffs, v. MEN'S INTERNATIONAL PROFESSIONAL TENNIS COUNCIL, M. Marshall Happer, III and Philippe Chatrier, Defendants.
• Court: U.S. District Court — Southern District of New York

678 F. Supp. 1035

VOLVO NORTH AMERICA CORPORATION, International Merchandising Corporation, and Proserv, Inc., Plaintiffs, v. MEN'S INTERNATIONAL PROFESSIONAL TENNIS COUNCIL, M. Marshall Happer, III and Philippe Chatrier, Defendants.

No. 85 Civ. 2959 (KTD).

United States District Court, S.D. New York.

August 10, 1987.

Rogers & Wells, New York City, for plaintiff Volvo North America Corp.; James J. Maloney, of counsel.

Lloyd I. Isler, P.C., New York City, for plaintiff Intern. Merchandising Corp.

Williams & Connolly, Washington, D.C., for plaintiff ProServ, Inc.; Steven M. Umin, Robert S. Litt, Mark S. Kevinstein, of counsel.

Simpson Thacher & Bartlett, New York City, for defendants Men's Intern. Professional Tennis Council, M. Marshall Happer, III, and Philippe Chatrier; Roy L. Reardon, Charles E. Koob, Michael J. Chepiga, Mary Elizabeth McGarry, Julie R. Fenster, of counsel.

MEMORANDUM & ORDER

KEVIN THOMAS DUFFY, District Judge:

The decision on this motion for summary judgment submitted in January of 1986 has been a long time in coming. The reason for this is that I had difficulty (as often happens) in articulating the obvious. Sometimes it is necessary to explain the obvious, something that district court judges are competent to do. Cuisinarts, Inc. v. Robot-Coupe International Corp., 509 F.Supp. 1036, 1043 (S.D.N.Y.1981). It is necessary in this case.

When hiring an employee, an employer may make that employment dependent on certain conditions. Such conditions may include length and hours of employment, rate of pay, vacation time, sick leave policies, and restrictions on whether the employee may work at other jobs, so long as they are not imposed for longer than a reasonable period of time. The employment contracts at issue bind the employee tennis players to such conditions for a period of approximately thirty-six weeks per year. The basic charge here is that these employment contracts for tennis players preclude the plaintiffs from hiring those players during that period, so that plaintiffs cannot successfully compete in exhibiting those players. Sophist arguments advanced by plaintiffs would turn this into an illegal monopoly and a violation of the antitrust laws. The real relief sought by plaintiffs is a declaration by this court that exclusive employment contracts even for a reasonable period of time monopolize the employees' time and are thus illegal. With this in mind, a more detailed recitation of the facts presented here is appropriate.

FACTS

Plaintiffs, Volvo North America Corporation ("Volvo"), International Merchandising Corporation ("IMC"), and ProServ, Inc. ("ProServ"), bring this action against defendants, Men's International Professional Tennis Council ("MIPTC"), M. Marshall Happer, III, (MIPTC's Administrator), and Philippe Chatrier, (MIPTC's Chairman), alleging, inter alia, violations of the federal antitrust laws. Defendants now move: (1) to dismiss the entire complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted, or, in the alternative, (2) to dismiss Volvo's fraud claims pursuant to Fed.R.Civ.P. 9(b) for failure to plead fraud with particularity, and (3) to dismiss certain portions of the complaint pursuant to Fed.R.Civ.P. 12(b)(1) because they are not ripe for adjudication.

Defendant MIPTC is an unincorporated association that has, since 1974, organized and overseen the Grand Prix Circuit ("Grand Prix"), a series of men's professional tennis tournaments. Defendants Happer and Chatrier are officers of MIPTC. MIPTC is a nine-member council comprised of three representatives of the International Tennis Federation ("ITF"), three representatives of the players, one representative of the North American tournament directors, one representative of European tournament directors, and one representative of the directors of all other MIPTC-sanctioned tournaments. Plaintiff Volvo is a corporation principally engaged in the production of automobiles and trucks, but it also produces and sponsors men's professional tennis events. Plaintiffs IMC and ProServ are corporations engaged in the management of professional athletes, including men's professional tennis players. Both IMC and ProServ are also in the business of producing men's professional tennis events, and it is in this capacity that they bring this suit. Therefore this memorandum will deal with all three plaintiffs solely as producers of men's professional tennis events, and will not address IMC's and ProServ's status as player-agents.

The production of men's professional tennis events generally involves several parties. The "owner" of the event is obligated to pay the expenses of the event, including players' compensation and the facility costs where the event is played, and is entitled to receive revenues generated by the event. Often the owner contracts with other parties to handle some or all of the functions of producing the event, such as: player-agents, advertisers, parties to market television broadcast rights, sponsorship rights, concessions, programs, and other products associated with the event, or parties to manage the events' day-to-day operations.

Individual men's professional tennis events can involve several different sponsors. The "title" sponsor purchases the right to have its name included in the title of the event. The "presenting" sponsor purchases the right to have the event identified and advertised as "presented by" that sponsor. "Secondary sponsors" pay for other subsidiary sponsorship rights such as the right to have the sponsor's product identified and advertised as the "official product" of the event. Sponsorship rights usually also include such benefits as tickets to attend the event, the right to post banners and distribute promotional materials at the event site, and to advertise in the event program.

From 1980 through 1984, Volvo purchased the rights to have its name identified as the overall sponsor of the Grand Prix. Other subsidiary sponsors also present and sponsor individual Grand Prix events. Although Volvo sponsored the Grand Prix, it did not assume responsibility for the management of the various events nor did it develop any of the tournament's rules. Apparently, MIPTC was responsible for sanctioning and scheduling all Grand Prix events. In January of 1984, Volvo sought to continue its sponsorship of the Grand Prix and submitted a sponsorship bid to MIPTC. Nabisco Brands, Inc. ("Nabisco") also submitted a bid to MIPTC to become the Grand Prix sponsor. On February 1, 1984, MIPTC announced that Nabisco would become the 1985 Grand Prix sponsor.

Because of Volvo's 1980 through 1984 Grand Prix sponsorship, and its assumption that its sponsorship would continue, it acquired contractual rights to the use of Madison Square Garden for the January 1985 Masters Tournament, and had contracted with NBC to televise the Masters Tournament during that week in future years. Because its Grand Prix sponsorship ended in 1984, Volvo contracted with MIPTC in 1985 (the "1985 Agreement") to assign its contracts with Madison Square Garden and NBC to MIPTC. In return, MIPTC agreed to sanction Volvo's subsidiary sponsorship of several individual Grand Prix events. Both MIPTC and Volvo agreed to cooperate with each other's reasonable promotional activities.

In July 1985, plaintiffs Volvo, IMC and ProServ initiated this action against defendants MIPTC and two of its officers. The complaint essentially alleges eight causes of action against the defendants. All three plaintiffs claim that defendants' acts constitute:

(1) a combination and conspiracy to restrain trade, and a group boycott in violation of the Sherman Act, 15 U.S.C. § 1 (1982 & Supp. III 1985);¹

(2) a combination, conspiracy and attempt to monopolize trade in violation of the Sherman Act, 15 U.S.C. § 2 (1982);²

(3) interference with prospective business relationships; and

(4) unfair competition.

Plaintiff Volvo alleges that defendants' acts constitute the following causes of action against it individually:

(5) breach of MIPTC's bidding conditions for the 1985 Grand Prix sponsorship, and of the 1985 Agreement;

(6) fraud;

(7) defamation; and

(8) product disparagement.

Claims Asserted by Volvo, IMC, and ProServ

Plaintiffs' antitrust and unfair competition claims essentially hinge on their allegation that MIPTC has combined and conspired to monopolize and restrain trade and compete unfairly in men's professional tennis. Plaintiffs contend that they are current and potential competitors of MIPTC and that MIPTC is preventing them and any other entity from creating and successfully operating an alternate tennis circuit to the Grand Prix. They assert that MIPTC is using three methods to accomplish this: (1) agreements with World Championship Tennis, Inc. ("WCT"); (2) the use of player-commitment contracts; and (3) the proposed implementation of certain rules. Plaintiffs also contend that defendants' antitrust conduct constitutes interference with prospective business relationships.

The only co-conspirator named in the complaint is the ITF. The ITF formed MIPTC originally, participates in MIPTC's operation, and ITF members make up one-third of MIPTC. Because ITF makes up part of MIPTC, and because it is legally impossible to conspire with oneself, United States v. Gisehaltz, 278 F.Supp. 434, 437 (S.D.N.Y.1967), plaintiffs can make out no claim of conspiracy to restrain trade or to monopolize against ITF and MIPTC. Plaintiffs also allege that other co-conspirators exist, "some of whom may not be known to the plaintiffs at this time." First Amended Complaint, at ¶ 8. However, no conspiracy claim can stand against unidentified and unknown parties.

First, plaintiffs claim that WCT produced a series of tennis events competitive with the Grand Prix, and that defendants responded with anticompetitive actions against WCT, eventually reaching an agreement by which the MIPTC and WCT consented to...