UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
______________________
No. 98-11453
______________________
SPECTATORS' COMMUNICATION NETWORK
INC.; FRANK L. MITCHELL, Plaintiffs - Appellants,
versus
COLONIAL COUNTRY CLUB; ET AL., Defendants,
ANHEUSER-BUSCH, INC., Defendant - Appellee.
_________________________________________________________________
__
Appeal from the United States District Court for the
Northern District of Texas
_________________________________________________________________
__
May 31, 2001
Before POLITZ, GIBSON,* and HIGGINBOTHAM, Circuit Judges.
JOHN R. GIBSON, Circuit Judge.
Spectators' Communication Network and its owner, Frank
Mitchell,1 appeal from the summary judgment entered in favor of
Anheuser-Busch, Inc., the only remaining defendant in their
antitrust suit alleging that Spectators' was excluded from
broadcasting professional golf tournaments. Spectators' contends
*
Circuit Judge of the Eighth Circuit, sitting by
designation.
1
We will refer to Spectators' and Mitchell collectively as
Spectators'.
1
that the PGA and the other defendants organized a group boycott
of Spectators' in order to put it out of business. We conclude
that Spectators' made an adequate showing of an antitrust
conspiracy that makes economic sense. Although Spectators' has
not shown a horizontal boycott that would constitute a per se
violation of the Sherman Act, it should be allowed the chance to
prove its case under the rule of reason. We therefore reverse
the entry of summary judgment for Anheuser-Busch on Spectators's
antitrust claim. However, we affirm the district court's entry
of judgment for Anheuser-Busch on Spectators's state law claims.
Spectators' pioneered the use of on-site radio broadcasting
at professional golf tournaments. Because golf fans at a
tournament can only see a small part of the action going on at
any time, Spectators' began to report events taking place at
other locations at the tournament. Broadcasts were available
only on the golf course and were transmitted through special low-
frequency radios. Spectators' made money by selling advertising
rights for on-air commercials and for logos which were placed on
the special radios.
The world of professional golf, in which Spectators'
operates, consists of several tiers of interests that figure in
this case. At the top is the Professional Golf Association, or
PGA, which controls the golfers through contracts that restrict
the golfers from playing in non-PGA events if they wish to remain
2
on the PGA Tour.
The second tier of interests is composed of the sponsors,
which in turn consist of two classes: "tournament sponsors," who
organize and conduct the tournament as co-sponsors with the PGA,
typically to raise money for local charities; and "corporate
sponsors," who support the Tour tournaments financially in
exchange for publicity. The sponsors were associated in an
organization called American Golf Sponsors, which included NEC,
K-Mart and Anheuser-Busch, all of whom were corporate sponsors of
tournaments. Through a standard Sponsor Agreement, the PGA
required the tournament sponsors to transfer all media rights,
including television and radio broadcast rights, to the PGA and
to give the PGA veto power over any radio broadcasting equipment
that would be placed on the golf course.
The third tier of interests consists of Spectators' and its
competitors in the on-site broadcasting business. Eventually,
the PGA took over the on-site broadcasting niche itself,
arranging to have the Tour events broadcast by Vanguard
International, LLC, broadcasting as the "PGA Tour Radio Network."
Spectators' contends that the relevant market is the market
for on-site advertising at golf tournaments. According to
Spectators', this market is not interchangeable with other kinds
of sports advertising because of the unusually desirable
demographic characteristics of the people who attend golf
3
tournaments, in that the spectators are affluent, highly
educated, and busy.
From 1986 to 1990, Spectators' dealt directly with the PGA,
which reserved the right to "exercise extensive controls" and to
charge Spectators' a fee for the privilege of broadcasting.
Their relationship ended in 1990, and Spectators' sued the PGA.
In the summer of 1991, the PGA gave Spectators' permission to
enter broadcasting deals with the sponsors of individual
tournaments. That fall Spectators' and Anheuser-Busch entered a
contract for Spectators' to broadcast sporting events as the
"Budweiser Spectators Network," which involved advertising
Anheuser-Busch products on-air and putting Anheuser-Busch logos
on the Spectators' radios at one golf tournament, a car race, and
a tennis match. In November 1992, Anheuser-Busch confirmed by
letter that it had agreed with Spectators' to sponsor the
broadcast of seven unspecified events in 1993, with a formal
contract to be drafted later. In April 1993, Anheuser-Busch and
Spectators' entered a contract for advertising in connection with
broadcasts at three golf tournaments: the K-Mart Greater
Greensboro Open, the Anheuser-Busch Classic, and the NEC World
Championship. Spectators' completed the first two broadcasts,
but was unable to do the third because the sponsor, NEC, refused
to permit Spectators' to broadcast from the golf course. Frank
Mitchell, the owner of Spectators', testified in an affidavit
that he learned from Barbara Burdick, an employee of NEC, that
4
NEC had "succumbed" to the PGA's requests not to allow
Spectators' to broadcast the NEC tournament. Similarly, Mitchell
testified that in the fall of 1993, a representative of the K-
Mart Greater Greensboro Open told him that the PGA would not
allow the Greensboro tournament or other tournaments to let
Spectators' broadcast at their tournaments.
Beginning in July 1993, Mitchell tape recorded several
conversations with Anheuser-Busch's David Brunette in which
Brunette said that Anheuser-Busch was under pressure from the PGA
not to use Spectators':
You know, so I don't know, I mean they [the PGA Tour]
don't want to give you, they don't mind if we do them
[on-site broadcasts,] but they don't want us using you.
. . .
The gist of these conversations was that the PGA, and in
particular, Gary Stevenson of the PGA, was hostile to Spectators'
because of Spectators's lawsuit against the PGA and that the PGA
would try to prevent Anheuser-Busch from working with
Spectators'. For instance, Brunette reported:
[I]t's just that obviously, the PGA's just concerned
about the fact that you know we're trying to deal with
you and at the same time you're suing them. It's
something that they have to grant us. We want to have
the rights to do this and if they're not willing to
grant us those rights, uh, you know, you've got
somewhat of a battle if you start trying to do these
things. . . . I mean, they're just pretty adamant
about the fact that they don't, they're not very happy
with what's going on and they don't cherish the fact
that we'd be working with you, but that still doesn't
have anything to do with the fact that the funding is
tight.
5
Spectators' contends that the PGA also made concessions in
other aspects of its regulation of tournaments to persuade
Anheuser-Busch not to deal with Spectators'. Spectators contends
that the PGA previously had in place a "no alcohol" policy;
though the extent of such a policy is unclear, at the least the
PGA Commissioner limited the advertising of alcoholic products in
connection with the Tour. On September 22, 1993, Anheuser-Busch
representatives met with the PGA's Gary Stevenson and Leo
McCullagh. They reached an agreement on an extensive program
called the "Michelob 19th Hole" program, which involved Anheuser-
Busch becoming a sponsor of the Tour Championship, advertising
during golf events on television, using the PGA's logo in product
promotions, and maintaining a "19th Hole" pavilion, a mobile
exhibit that included substantial advertising at the tournament
site. Shortly after this meeting, Anheuser-Busch wrote
Spectators', cancelling the April 1993 contract.
Eventually, Anheuser-Busch's Michelob beer became the
"official beer" of the PGA Tour.
Spectators' brought this suit against Colonial Country Club,
NEC, K-Mart, American Golf Sponsors, Anheuser-Busch and the PGA
Tour and its employee, Stevenson. The complaint alleged state
commercial law and federal antitrust claims, in particular, that
the defendants had engaged in a conspiracy to restrain trade in
the market for professional golf tournament on-site advertising
services.
6
Eventually, all the defendants except Anheuser-Busch were
dismissed, either by the court or pursuant to agreements with the
plaintiffs. Anheuser-Busch moved for summary judgment, which the
district court granted. The court held that Spectators' failed
to perform its obligation under the 1993 contract to broadcast
the NEC tournament and therefore could not bring an action to
enforce the contract. The court held that the plaintiffs' claim
for civil conspiracy under Texas law failed for lack of evidence
of conspiracy or any unlawful overt acts pursuant to the alleged
conspiracy. As for the antitrust conspiracy, the court rejected
Spectators's group boycott theory. The court held that the
evidence did not show Anheuser-Busch had entered a combination
with the intent to restrain competition in the market for
advertising, and, in fact, such a claim would be nonsensical,
since Anheuser-Busch would not rationally act to cause injury to
purchasers of advertising, a class which includes Anheuser-Busch
itself. The court concluded that no anticompetitive combination
was shown by evidence that PGA conditioned the 19th Hole package
on Anheuser-Busch's discontinuation of business with Spectators':
"At best, Plaintiffs raise a fact issue regarding whether
[Anheuser-Busch] decided not to engage in further business
relations with [Spectators'] because it desired to engage in more
lucrative business relations with others, and was concerned that
its chances of securing the latter might be hampered by the
former."(emphasis added). The court held that Spectators'
7
evidence showed nothing more than competitive behavior by the
defendants, and therefore Spectators' was injured by too much
competition, not too little.
I.
We review the grant of summary judgment de novo. See Stewart
Glass & Mirror, Inc. v. U.S. Auto Glass Discount Centers, Inc., 200
F.3d 307, 312 (5th Cir. 2000). Summary judgment is appropriate
when there are no genuine issues of material fact and the movant is
entitled to entry of judgment as a matter of law. See id. The
party opposing the summary judgment motion must do more than show
there is some metaphysical doubt as to the material facts. See
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
586 (1986).
Under section 1 of the Sherman Act, 15 U.S.C. § 1 (1994), the
substantive law limits the range of permissible inferences from
ambiguous evidence. See Matsushita, 475 U.S. at 588. In
particular, courts will not draw inferences to support a claim that
makes no economic sense; such a claim will require unusually
persuasive evidence to withstand summary judgment. See id. at 587,
596-98. Rational economic actors do not ordinarily conspire to
injure themselves.
Spectators' claims that the PGA combined with Anheuser-Busch
and other tournament sponsors to freeze Spectators' out of the
advertising market so that the PGA could appropriate Spectators's
8
business for itself. According to Spectators', the PGA
accomplished this both by coercion and by enticement. The PGA
could coerce the sponsors by invoking rights in its sponsorship
contracts giving the PGA the power to control broadcasts of PGA
Tour tournaments. The enticement took the form of changing the
existing PGA policies about alcohol-related advertising so that
Anheuser-Busch could purchase advertising opportunities, such as
the 19th Hole program, directly from the PGA. According to
Spectators', this concession was conditioned upon Anheuser-Busch
not using Spectators' for on-site broadcasts.
A claim under section 1 of the Sherman Act requires proof of
three elements: that the defendant (1)engaged in a conspiracy (2)
that restrained trade (3) in a particular market. See Stewart
Glass, 200 F.3d at 312. To prove conspiracy or "concerted action,"
the plaintiff must prove that the conspirators had a "conscious
commitment to a common scheme designed to achieve an unlawful
objective." Monsanto Co. v. Spray-Rite Serv. Corp, 465 U.S. 752,
768 (1984).
The district court held, and Anheuser-Busch argues, that there
was not sufficient evidence of a combination or conspiracy, because
it would have been irrational for Anheuser-Busch to conspire to
restrain competition in a market in which it was a purchaser:
As a consumer of on-site advertising at professional
golf tournaments, [Anheuser-Busch] has no economic
incentive to reduce competition in the market because
doing so would bring about its own economic harm. "[A]
theory of liability attributing irrationality to
9
consumers does not get very far." Indeed, where an
antitrust claim simply makes no economic sense, more
persuasive evidence is required than would otherwise be
necessary. Plaintiffs fail to provide such evidence.
Slip op. at 27-28 (internal citations omitted).
By reasoning that a consumer would never wish to bring about
a restraint of trade in the market where it buys, the district
court has ignored salient facts of this case: Spectators' contends
that Anheuser-Busch was both coerced and enticed to comply with
the PGA's wishes. Though in the abstract Anheuser-Busch would have
nothing to gain from freezing a competitor out of the on-site
broadcasting market, in the actual case at hand, Spectators'
alleges that the PGA made it worth Anheuser-Busch's while to
cooperate, by opening up the new opportunity to advertise through
the 19th Hole exhibit and the designation of Michelob as the
official beer of the PGA tournament on the condition that Anheuser-
Busch not do business with Spectators'. Additionally, Spectators'
alleges that the PGA coerced Anheuser-Busch to boycott Spectators'
by exercising its contractual power to control radio broadcasts of
Tour events.
Antitrust law has never required identical motives among
conspirators, and even reluctant participants have been held liable
for conspiracy. In United States v. Paramount Pictures, Inc., 334
U.S. 131, 161 (1948), the Supreme Court refused to distinguish
between conspirators who fomented the conspiracy and those who only
participated because they were coerced:
10
There is some suggestion . . . that large exhibitors with
whom defendants dealt fathered the illegal practices and
forced them onto the defendants. But as the District
Court observed, that circumstance if true does not help
the defendants. For acquiescence in an illegal scheme is
as much a violation of the Sherman Act as the creation
and promotion of one.
The Supreme Court describes group boycotts as "joint efforts
by a firm or firms to disadvantage competitors by 'either directly
denying or persuading or coercing suppliers or customers to deny
relationships the competitors need in the competitive struggle."
Northwest Wholesale Stationers, Inc. v. Pacific Stationery and
Printing Co., 472 U.S. 284, 294 (1985) (internal quotation omitted)
(emphasis added). This description implicitly recognizes that an
integral part of a boycott is often bringing pressure to bear
("persuading or coercing") on other participants who have no direct
motive to restrain trade. Conspirators who are not competitors of
the victim may have no interest in curtailing competition in a
market in which they do not compete; nevertheless, when they have
been enticed or coerced to share in an anticompetitive scheme,
there is still a combination within the meaning of the Sherman Act.
The Third Circuit rejected the idea that parties to a
conspiracy must share an identical anti-competitive motive in
Fineman v. Armstrong World Industries, Inc., 980 F.2d 171, 212 (3d
Cir. 1992). The court held that where an otherwise disinterested
party had some interest in the ringleader's economic success, the
conspiracy could make economic sense. In Fineman, a flooring
manufacturer, which wished to develop its own video program,
11
convinced a wholesaler not to deal with a company that developed a
"video magazine" to be used as a sales aid in the flooring
business. The video magazine company sued the manufacturer on a
vertical boycott theory. The manufacturer argued that there was no
illegal combination because the wholesaler did not compete with the
video magazine company and therefore had no interest in eliminating
it as a competitor of the manufacturer. The district court granted
the manufacturer a directed verdict on this theory. The Third
Circuit reversed, saying:
We conclude that the district court's novel approach is
misplaced as it renders section 1 claims unavailable to
private litigants suffering antitrust injury as a result
of concerted action in a vertical matrix. Such a
restrictive rule fails to recognize the difference
between motive and objective and would dramatically alter
the antitrust landscape in a manner unjustified by either
precedent or policy considerations. . . . A rational
factfinder could infer agreement with the objective from
knowledge of the objective and action calculated to
achieve the objective despite differing motives.
Id. at 212. Although the wholesaler did not act from the same
motive as the manufacturer, that did not mean that it had no motive
to conspire. Rather, its motive derived from its relationship with
the manufacturer: "Because [the wholesaler] relied upon sales of
[the manufacturer's] products for 90 percent of its gross revenues,
however, it would naturally perceive that that which is in [the
manufacturer's] interest also inures to [the wholesaler's own]
benefit." Id. at 212-13. Accord Full Draw Productions v. Easton
Sports, Inc., 182 F.3d 745, 751 (10th Cir. 1999) (boycott by
customers against supplier could make economic sense because
12
customers controlled competing supplier).
Another way a ringleader can persuade a vertically aligned
actor to boycott the ringleader's competitor is by coercion. In
MCM Partners, Inc. v. Andrews-Bartlett & Associates, Inc., 62 F.3d
967 (7th Cir. 1995), two exhibition contractors refused to rent
equipment from MCM because of "threats of labor disruption by a
union official in cahoots with the would-be monopolist," id. at
972, a competitor of MCM. The effect of the exhibitors'
acquiescence to the coercion was to raise the price they had to pay
for the equipment, obviously not a result they would have chosen in
the absence of the threat. See id. at 971. MCM sued the
exhibitors for participating in a vertical boycott. The exhibitors
argued in their defense that they had only participated because of
coercion. The Seventh Circuit rejected the coercion defense,
concluding that "the 'combination or conspiracy' element of a
section 1 violation is not negated by the fact that one or more of
the co-conspirators acted unwillingly, reluctantly, or only in
response to coercion." Id. at 973. "So long as defendants knew
that they were acquiescing in conduct that was in all likelihood
unlawful, we have no difficulty concluding that they thereby joined
a combination or conspiracy for which they can be held accountable
under section 1." Id. at 975.
The Tenth Circuit applied similar reasoning to a tying case in
Systemcare, Inc. v. Wang Laboratories Corp., 117 F.3d 1137 (10th
Cir. 1997) (en banc). There, the court held that a combination
13
arose when a buyer made a coerced purchase forced on it by a seller
engaged in tying. Judge Tacha reasoned that when a buyer accedes
to the anticompetitive demands of a seller foisting an unwanted
product on him, it deprives the market of "independent centers of
decisionmaking," which is just what the concerted action
requirement of section 1 exists to prevent. Id. at 1143. Accord
Datagate, Inc. v. Hewlett-Packard Co., 60 F.3d 1421, 1426-27 (9th
Cir. 1995); Will v. Comprehensive Accounting Corp., 776 F.2d 665,
670 (7th Cir. 1985).
Applying these precedents, we conclude that there can be
sufficient evidence of a combination or conspiracy when one
conspirator lacks a direct interest in precluding competition, but
is enticed or coerced into knowingly curtailing competition by
another conspirator who has an anticompetitive motive. So even
though it was not directly in Anheuser-Busch's interest to
eliminate competition in the market for on-site advertising at
tournaments, other facts in this record made it economically
plausible for Anheuser-Busch to participate in a combination
fomented by the PGA.
Accordingly, the district court erred when it held that
Spectators' had not shown concerted action because its allegations
were not economically plausible.
II.
Even though Spectators' has established a case for concerted
14
action, the question remains whether the combination alleged was a
restraint of trade, or more precisely, an unreasonable restraint of
trade. See Northwest Wholesale Stationers, Inc. v. Pacific
Stationery & Printing Co., 472 U.S. 284, 289 (1985). If
Spectators' cannot prove an unreasonable restraint of trade, it
would be futile for us to remand the antitrust claim.
We assess whether a combination restrains trade unreasonably
by use of the "rule of reason," weighing all the circumstances of
the case, see Business Electronics Corp. v. Sharp Electronics
Corp., 485 U.S. 717, 723 (1988), unless the combination falls
within one of the categories of per se unreasonableness--conduct so
pernicious and devoid of redeeming virtue that it is condemned
without inquiry into the effect on the market in the particular
case at hand. See Northwest Stationers, 472 U.S. at 289.
Spectators' characterizes the combination as a "group boycott"
that was per se illegal. Some group boycotts fall into the
category of per se section 1 violations, but not all. "Exactly
what types of activity fall within the forbidden category is . . .
far from certain. '[T]here is more confusion about the scope and
operation of the per se rule against group boycotts than in
reference to any other aspect of the per se doctrine.'" Id. at 294
(quoting L. Sullivan, Law of Antitrust 229-30 (1977)).
Although the distinction between boycotts that are per se
illegal and those judged by the rule of reason is often a vexing
15
one, one rule is clear: only horizontal2 boycotts can be per se
violations of the Sherman Act. "[A]ntitrust law does not permit
the application of the per se rule in the boycott context in the
absence of a horizontal agreement, though in other contexts, say
vertical price fixing, conduct may fall within the scope of a per
se rule not at issue here." NYNEX Corp. v. Discon, Inc., 525 U.S.
128, 138 (1998); accord Sharp, 485 U.S. at 735-36 (vertical
restraint not per se illegal unless it includes agreement on price
or price levels). Thus, in order to bring its boycott claim within
the per se rule, Spectators' must point to a horizontal conspiracy,
in other words, a conspiracy between competitors, rather than a
vertical conspiracy between firms at different levels of
distribution. See Sharp Electronics, 485 U.S. at 730 and n.4
(explaining distinction between horizontal agreement and vertical
agreement with horizontal effects); Nova Designs, Inc. v. Scuba
Retailers Ass'n, 202 F.3d 1088, 1092 (9th Cir. 2000) (where only
parties to agreement are not competitors of each other, no
horizontal boycott).
To make a per se case, the horizontal agreement need not be
between competitors of the victim. In Klor's, Inc. v. Broadway-
Hale Stores, Inc., 359 U.S. 207 (1959), a boycott arranged by a
2
"Restraints imposed by agreement between competitors have
traditionally been denominated as horizontal restraints, and
those imposed by agreement between firms at different levels of
distribution as vertical restraints." Business Elecs. Corp. v.
Sharp Elecs. Corp., 485 U.S. 717, 730 (1988).
16
single competitor of the victim retailer, but carried out by a
"wide combination" consisting of manufacturers and distributors, as
well as the competing retailer, led to per se liability. Id. at
212-13. NYNEX harmonized Klor's with its rule limiting per se
analysis to horizontal boycotts: "Although Klor's involved a
threat made by a single powerful firm, it also involved a
horizontal agreement among those threatened, namely, the appliance
suppliers, to hurt a competitor of the retailer who made the
threat." 525 U.S. at 135. Cf. Northwest Stationers, 472 U.S. at
294 (per se liability applied to "efforts by a firm or firms to
disadvantage competitors by either directly denying or persuading
or coercing suppliers or customers to deny relationships the
competitors need in the competitive struggle.")(internal quotations
omitted and emphasis added).
Spectators' relies on a theory of per se liability, but its
arguments are inconsistent with NYNEX. Spectators' contends: "[A]
group boycott formed for the simple purpose of eliminating a trader
from the market, or putting a company out of business, is always
illegal, regardless of who is involved in the conspiracy." This
pronouncement is simply contrary to NYNEX, where the Supreme Court
rejected the argument that the defendants' motive of putting the
plaintiff out of business brought the case within the per se rule.
525 U.S. at 137-38. The Supreme Court warned that decisions to put
a victim out of business are not always the stuff of antitrust
17
liability: "To apply the per se rule here–-where the buyer's
decision, though not made for competitive reasons, composes part of
a regulatory fraud–-would transform cases involving business
behavior that is improper for various reasons, say, cases involving
nepotism or personal pique, into treble-damages antitrust cases."
Id. at 136-37 (emphasis supplied). When Spectators' alleges that
"the PGA Tour, driven to a fury by Mitchell's daring to sue it in
a former case, set out to destroy [Spectators']," it is relying on
the kind of vendetta that Justice Breyer stated would not give rise
to antitrust liability.
Spectators' also hints that it has carried the burden of
showing a horizontal agreement by alleging that the PGA is a
"horizontal competitor" of Spectators'. Involvement by one
competitor of the victim does not alone make a horizontal restraint;
there must be an agreement between more than one competitor at the
same level to make a horizontal restraint. See supra at 16. The
Supreme Court emphasized in Sharp Electronics that "a restraint is
horizontal not because it has horizontal effects, but because it is
the product of a horizontal agreement." 485 U.S. at 730 n.4.
However, despite its argument that a horizontal agreement is
not necessary to establish a per se case, Spectators' at least
pleaded a horizontal conspiracy. Its complaint alleged that the
conspiracy or combination involved members of the American Golf
Sponsors association, which included Anheuser-Busch, K-Mart, and
NEC. The sponsors operate at the same level. However, the only
18
evidence supporting NEC's participation in the conspiracy is
Mitchell's testimony that he learned from NEC's Barbara Burdick that
NEC had "succumbed" to PGA directives not to let Spectators'
broadcast the NEC tournament.3 Mitchell also testified that a
representative of the K-Mart Greater Greensboro Open told him that
the PGA would not allow Spectators' to broadcast PGA events. There
is thus evidence of sponsors separately agreeing with the PGA, but
no evidence of the competitors agreeing among themselves. This hub
and spoke sort of proof does not establish a horizontal combination.
See Royal Drug Co. v. Group Life and Health Ins. Co., 737 F.2d 1433,
1436-37 (5th Cir. 1984) (contracts entered separately between
powerful buyer and competing sellers not horizontal combination
without evidence of agreement among sellers); Brookins v.
International Motor Contest Ass'n, 219 F.3d 849, 852 n.3 (8th Cir.
2000); Lomar Wholesale Groc., Inc. v. Dieter's Gourmet Foods, Inc.,
824 F.2d 582, 590-95 (8th Cir. 1987) (distributor's separate
conspiracies with several suppliers to deny a competing distributor
access to the suppliers' products is not horizontal boycott); U.S.
Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 589, 594 (1st Cir.
1993) (exclusive dealing arrangements of HMO with many doctors are
3
Mitchell's testimony about these conversations with
sponsors appears to be vulnerable to hearsay objection. However,
Anheuser-Busch does not object to it and Spectators' argues that
it is admissible as co-conspirator hearsay. Because the district
court did not rule on the admissibility of the evidence, we will
not do so in the first instance, but will consider it part of the
record for the sake of argument.
19
vertical, not horizontal, without showing that HMO was actually tool
for doctors themselves).
Spectators' has therefore failed to establish a horizontal
conspiracy subject to the per se rule. We now turn to its
allegations of a vertical conspiracy.4 The district court held that
Spectators' had not established a rule of reason case against
Anheuser-Busch because it had not shown that Anheuser-Busch, alone,
had market power and therefore could affect competition in any
relevant market. Slip op. at 23 n.16. Of course, Spectators'
alleges that PGA, not Anheuser-Busch, had market power. Apparently
because the district court held there was no combination, it did not
examine the market power of the alleged co-conspirator, the PGA.
But after all, the reason for looking at market power is to
determine whether the combination or conspiracy, not each individual
conspirator, has the power to hurt competition in the relevant
4
Although Spectators' devotes most of its brief to arguing
that it showed a horizontal conspiracy that is per se illegal, it
also makes vertical boycott, rule of reason arguments that
preserve the rule of reason issue for our review. Spectators'
argues at length that its case is comparable to Fineman v.
Armstrong World Industries, Inc., 980 F.2d 171 (3d Cir. 1992),
and MCM Partners, Inc. v. Andrews-Bartlett & Associates, Inc., 62
F.3d 967 (7th Cir. 1995), vertical boycott cases involving
coerced customers. Vertical boycotts are subject to the rule of
reason. See NYNEX, 525 U.S. at 138. Moreover, Spectators'
argues that the district court should have considered the
anticompetitive acts of the entire conspiracy, rather than those
of Anheuser-Busch alone; at the same time, Spectators' also
argues that proof of anticompetitive effects is irrelevant to a
per se case. Thus, by arguing the merits of an issue that is
irrelevant to per se analysis, Spectators' is evidently
challenging the district court's rule of reason holding.
20
market. See FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 460-61
(1986) ("Since the purpose of the inquiries into market definition
and market power is to determine whether an arrangement has the
potential for genuine adverse effects on competition, proof of
actual detrimental effects, such as a reduction of output, can
obviate the need for an inquiry into market power, which is but a
surrogate for detrimental effects.")(internal quotations omitted and
emphasis added). As the rule of reason theory was not addressed
squarely below, we remand for consideration in the first instance
by the district court of whether Spectators' has presented evidence
of a vertical boycott constituting an unreasonable restraint of
trade under the rule of reason.
III.
Spectators' contends that the district court erred in entering
judgment for Anheuser-Busch on Spectators's breach of contract
claim. The district court held that Spectators' had no claim for
breach of the April 1993 contract because it failed to perform its
obligation under that contract to broadcast the NEC tournament.
Spectators' contends that its performance was excused by Anheuser-
Busch. In support, Spectators' points to the assertion in
Mitchell's affidavit that "in late April or May 1993" Brunette of
Anheuser-Busch "instructed [Spectators'] not to schedule any further
golf events." Spectators' interprets this ambiguous instruction
from Brunette (schedule any further events after May? after the end
of the contract?) as proof that Anheuser-Busch repudiated the
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contract. However, the parties clearly did not act on the premise
that the contract was called off in April or May 1993, because
Spectators' broadcast the July 1993 Anheuser-Busch Classic. Because
the parties did not give any effect to the alleged repudiation by
Brunette, it does not excuse Spectators's failure to perform months
down the road.
Spectators' falls back on the November 1992 letter of intent,
arguing that it is an enforceable contract in its own right. The
letter, from Dave Brunette, stated that Anheuser-Busch had reviewed
Spectators's proposal and agreed to the broadcast of seven
unspecified "Spectators Communications events in 1993." There was
no mention of price or of what advertising Anheuser-Busch was to
receive. Brunette asked Spectators' to contact him to discuss which
events they would broadcast. Brunette stated that he would work
with Anheuser-Busch's legal department in the coming weeks to draft
a contract with "the appropriate business points as well as
representations, warranties, indemnities and other provisions
customarily included in Anheuser-Busch agreements." Eventually,
Anheuser-Busch produced such a contract, which is the April 1993
contract just discussed. The 1993 agreement and the November 1992
letter both covered the 1993 year, but the terms of the two
documents varied materially. The contract was much longer and more
detailed than the letter. Moreover, the contract specified the
broadcast of only three events, rather than the seven mentioned in
the letter. The 1993 contract contained a merger clause stating:
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"This Agreement constitutes the entire understanding between the
parties with respect to the subject matter hereof and supersedes all
prior or contemporaneous agreements, promises, understandings or
representations, written or oral, in regard thereto."
Anheuser-Busch argues that the 1992 letter was only an
agreement to agree and that the April 1993 agreement represented the
fruits of further negotiation that resulted in a complete contract
with a reduced broadcast schedule. Therefore, Anheuser-Busch
argues, the merger clause in the 1993 agreement establishes that the
formal contract superseded the 1992 letter. Spectators' responds
that the 1993 contract did not supersede the 1992 letter because the
two documents had different subject matters: the 1992 letter
referred to seven broadcasts, and the 1993 contract referred to only
three. Spectators's complaint and the record are devoid of any
support for this theory; it did not perform seven broadcasts in
1993. It pleaded performance of a total of two, the first two in
the 1993 contract. Because the subject matter of the 1992 letter
was obviously subsumed in the 1993 formal contract, the district
court properly granted summary judgment on this claim, and we need
not deal with Spectators's many other arguments on this point.
IV.
The district court entered judgment against Spectators' on its
claim under Texas law for civil conspiracy on the ground that
Spectators' had not proved a meeting of the minds to put Spectators'
out of business or any "unlawful overt acts" in furtherance of any
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conspiracy. Spectators' argues that it showed Anheuser-Busch
intended to put it out of business, but as the district court held,
the evidence shows only that Anheuser-Busch had an intent to quit
doing business with Spectators', rather than any design or thought
of driving Spectators' out of business. Spectators' has therefore
failed to prove civil conspiracy under Texas law, which requires
that the conspirators share "a preconceived plan and unity of design
and purpose." Schlumberger Well Surveying Corp. v. Nortex Oil and
Gas Corp., 435 S.W.2d 854, 857 (Tex. 1969); accord Ward v. Sinclair,
804 S.W.2d 929, 931 (Tex. Ct. App. 1990).
***
We affirm the judgment of the district court as to the contract
and civil conspiracy claims, but reverse as to the claim for
conspiracy to violate section 1 of the Sherman Act.
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