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Race Tires America, Inc. v. Hoosier Racing Tire Corp.

September 15, 2009

RACE TIRES AMERICA, INC., A DIVISION OF SPECIALTY TIRES OF AMERICA, INC.; SPECIALTY TIRES OF AMERICA, INC.; SPECIALTY TIRES OF AMERICA (PENNSYLVANIA), INC.: AND SPECIALTY TIRES OF AMERICA (TENNESSEE), LLC, PLAINTIFFS,
v.
HOOSIER RACING TIRE CORP., AND DIRT MOTOR SPORTS, INC. D/B/A WORLD RACING GROUP, DEFENDANTS.



The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM OPINION AND ORDER OF COURT

Presently before the Court for disposition are the following:

* MOTION FOR SUMMARY JUDGMENT THAT HOOSIER HAS COMMITTED NO ANTITRUST VIOLATIONS, with brief in support, filed by Hoosier Racing Tire Corp. ("Hoosier") (Document No. 196 and Sealed Document No. 206), joined by co-Defendant Dirt Motor Sports, Inc. (Sealed Document No. 197-2); MEMORANDUM IN OPPOSITION filed by Plaintiffs(Sealed Document No. 228); and the REPLY BRIEF filed by Hoosier (Sealed Document No. 248);

* MOTION FOR SUMMARY JUDGMENT, with brief in support, filed by Dirt Motor Sports, Inc. d/b/a World Racing Group ("DMS") (Sealed Document No. 197 and Sealed Document No. 199); MEMORANDUM IN OPPOSITION filed by Plaintiffs (Sealed Document No. 227); and REPLY MEMORANDUM filed by DMS (Sealed Document No. 251); and

* MOTION FOR PARTIAL SUMMARY JUDGMENT, with brief in support, filed by Plaintiffs (Sealed Document Nos. 202 and 204); BRIEF IN OPPOSITION filed by Hoosier (Sealed Document No. 223); and MEMORANDUM OF LAW IN OPPOSITION filed by DMS (Sealed Document No. 224).

The factual record has also been thoroughly developed via the CONCISE STATEMENT OF MATERIAL FACTS NOT IN DISPUTE filed by Hoosier (Sealed Document No. 207), PLAINTIFFS' RESPONSIVE CONCISE STATEMENT IN OPPOSITION TO MOTION FOR SUMMARY JUDGMENT FILED BY HOOSIER (Sealed Document No. 230), the CONCISE STATEMENT OF MATERIAL FACTS filed by DMS (Sealed Document No. 200), PLAINTIFFS' RESPONSIVE CONCISE STATEMENT OF MATERIAL FACTS IN OPPOSITION TO MOTION FOR SUMMARY JUDGMENT FILED BY DMS (Sealed Document No. 229); the RESPONSE TO PLAINTIFFS' "ADDITIONAL MATERIAL FACTS" filed by DMS (Sealed Document No. 250); the PLAINTIFFS' CONCISE STATEMENT OF MATERIAL FACTS IN SUPPORT OF THEIR MOTION FOR PARTIAL MOTION FOR SUMMARY JUDGMENT (Sealed Document No. 205); the RESPONSIVE CONCISE STATEMENT TO "PLAINTIFFS' CONCISE STATEMENT OF MATERIAL FACTS" filed by Hoosier (Sealed Document No. 221); PLAINTIFFS' REPLY TO HOOSIER'S RESPONSIVE CONCISE STATEMENT (Sealed Document No. 245); RESPONSE TO PLAINTIFFS' CONCISE STATEMENT OF MATERIAL FACTS filed by DMS (Sealed Document No. 225); and PLAINTIFFS' REPLY TO DMS' CONCISE STATEMENT OF MATERIAL FACTS (Sealed Document No. 244), as well as the voluminous exhibits submitted by all parties.

On July 14, 2009, the Court heard oral argument on the motions. For purposes of the oral argument and this Opinion only, the motions for summary judgment filed by Hoosier and DMS were consolidated. All parties were represented by counsel who presented and argued the issues skillfully and effectively. The matter is now ripe for disposition.

After a careful consideration of the motions, the filings in support and opposition thereto, the memoranda of the parties, the oral arguments of counsel, the relevant case law, and the record as a whole, the Motion for Summary Judgment filed by Hoosier will be granted, the Motion for Summary Judgment filed by DMS will be granted, and the Motion for Partial Summary Judgment filed by Plaintiffs will be denied as moot.

Standard of Review

Summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Thus, the Court's task is not to resolve disputed issues of fact, but to determine whether there exist any factual issues to be tried. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-49 (1986). The non-moving party must raise "more than a mere scintilla of evidence in its favor" in order to overcome a summary judgment motion. Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989) (citing Liberty Lobby, 477 U.S. at 249). Further, the non-moving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)). Distilled to its essence, the summary judgment standard requires the non-moving party to create a "sufficient disagreement to require submission [of the evidence] to a jury." Liberty Lobby, 477 U.S. at 251-52.

Several courts have noted that summary disposition of antitrust cases is difficult because of their inherent factual complexity and because motive and intent are paramount considerations. See e.g., Poller v. Columbia Broadcasting Sys., Inc., 368 U.S. 464, 473 (1962). However, complexity does not mean that summary disposition is thereby precluded or even disfavored in antitrust law. Capital Imaging Assoc., P.C. v. Mohawk Valley Medical Assoc., Inc., 996 F.2d 537, 541 (2d Cir. 1993). Rather, summary judgment may be particularly important in antitrust cases to prevent lengthy and drawn-out litigation that has a chilling effect on competitive market forces. Id. The present motions will be considered in light of these standards.

Procedural Background

Plaintiffs, Race Tires, Inc., a Division of Specialty Tires of America, Inc., and Specialty Tires of America Inc., initiated this lawsuit on September 25, 2007, by the filing of a five-count Complaint against only one defendant, Hoosier Racing Tire Corp. ("Hoosier"). Plaintiffs alleged Monopolization in violation of Section 2 of the Sherman Act (Count I), Conspiracy to Restrain Trade in violation of Section 1 of the Sherman Act (Count II), Attempted Monopolization in violation of Section 2 of the Sherman Act (Count III), Conspiracy to Monopolize (Count IV), and Request for A Declaratory Judgment pursuant to 28 U.S.C. § 2201 (Count V).

Less than a month later, on October 12, 2007, Plaintiffs filed an Amended Complaint in which they named Dirt Motor Sports, Inc. d/b/a World Racing Group ("DMS") as an additional defendant and included allegations specific to DMS.

On January 10, 2008, the Court entered a Case Management / Scheduling Order which established a deadline of May 30, 2008, for amending of the pleadings. The parties engaged in discovery, which resulted in a steady stream of disputed discovery motions being filed with the Court. At last count, the Court had ruled on at least ten (10) discovery motions.

On March 13, 2008, Plaintiffs filed a Second Amended Complaint in which two "sister companies" of Specialty Tires of America, Inc., were added as co-plaintiffs: Specialty Tires of America (Pennsylvania), Inc., and Specialty Tires of America (Tennessee), LLC.

On May 30, 2008, the actual deadline for seeking leave to amend the pleadings, Plaintiffs moved to amend their complaint a third time to add a new count which alleged a tying arrangement illegal under Section 1 of the Sherman Act. The Court granted Plaintiffs' request for leave and a Third Amended Complaint was filed on June 23, 2008.

On November 19, 2008, well after the expiration of the deadline for amending pleadings, Plaintiffs once again sought leave to amend their Complaint to add a count alleging a concerted refusal to deal (group boycott). Not surprisingly, Defendants strongly opposed Plaintiffs' request to amend their Complaint a fourth time. On December 16, 2008, the Court denied the request to amend finding that Plaintiffs had failed to demonstrate good cause to amend and that it would be prejudicial to Defendants, fifteen months (15) months after the lawsuit was initiated and seven (7) months after the expiration of the deadline for seeking leave to amend, to add a new claim based on an additional legal theory, which would require additional written discovery and depositions. See Sealed Document No. 155.

Background

The history between the parties to this antitrust lawsuit is lengthy and contentious. The Court has noted on numerous occasions the considerable tension among the respective parties and their attorneys.

Plaintiffs, Race Tires America, Inc., a Division of Specialty Tires of America, Inc.; Specialty Tires of America, Inc.; Specialty Tires of America (Pennsylvania), Inc., and Specialty Tires of America (Tennessee), LLC (collectively referred to as Plaintiffs or "STA") and Hoosier compete in selling racing tires used in auto racing events sponsored or promoted by DMS, and other sanctioning bodies, race track owners, promoters, and tour series. Competition between STA and Hoosier includes vying for single tire rule contracts with sanctioning bodies.

STA alleges that Hoosier has greater than a 70% market share in the dirt oval race track market, and an even greater market share in the market for the sale of race tires in sanctioned dirt oval track races. Third Amended Complaint, at ¶ 18. STA contends that Hoosier acquired and maintained its monopoly power by entering into anticompetitive exclusive dealing agreements with sanctioning companies and with individual track owners / promoters.

Plaintiffs allege that sanctioning companies, in exchange for payments from Hoosier, have adopted and promulgated "Hoosier-only" tire(s) rules, pursuant to exclusive dealing agreements with Hoosier. According to Plaintiffs, these Hoosier-only tire(s) rules foreclose competition in a substantial portion of each of the categories of cars that compete in dirt oval track racing. Plaintiffs contend that there is no legitimate business justification for the exclusive Hoosier-only single tire(s) rules.

DMS is one of three major sanctioning companies in dirt oval track racing; the other two are International Motor Contest Association ("IMCA") and WISSOTA Promotions, Inc. ("WISSOTA"). According to Plaintiffs, these three sanctioning companies sanction modified, late model, sprint, or stock car races at over 70% of the 636 weekly tracks in the United States. Third Amended Complaint, at ¶ 37. DMS sanctions over 5,000 races per year at over 200 dirt oval tracks in twenty-one (21) states; IMCA sanctions races at approximately 112 dirt oval tracks; and WISSOTA sanctions races at approximately 57 dirt oval tracks. Id. at ¶¶ 35-36.

DMS is the only sanctioning company named as a defendant in this lawsuit.

A. The Parties

Plaintiff Specialty Tires of America, Inc. ("Specialty") is a Pennsylvania corporation with its principal place of business and manufacturing facility in Indiana, Pennsylvania. Plaintiff Race Tires America, Inc. ("RTA") is a division of Specialty that designs, develops, markets and sells race tires which are manufactured by Specialty, Specialty Tires of America (Pennsylvania) and Specialty Tires of America (Tennessee) LLC. Plaintiffs (collectively referred to as "STA") are wholly-owned subsidiaries and part of the "tire division" of parent corporation Polymer Enterprises, Inc., a Delaware holding company.

STA manufactures and sells specialty tires, including but not limited to, tires for use in light aircraft, industrial handling equipment, mining equipment, farm and agriculture equipment, medium and heavy duty trucks, all terrain vehicles ("ATV"), light trucks, off the road equipment, bias ply passenger tires, and the military.

STA manufactures and sells its "house brand" racing tire known as the American Racer through its division RTA. American Racer tires include what STA denotes as dirt track racing and asphalt track racing tires, ATV racing tires, passenger performance tires, and race track equipment tires. STA also manufactures private label racing tires sold under the brand names Mickey Thomson, Burris, Morosso, Sand Tires, Unlimited; and Malibu Grand Prix. Most of these tires are not sold through STA's RTA division.

Defendant Hoosier is a family-owned business headquartered and located in Indiana. Hoosier focuses its business almost exclusively on selling racing tires. Hoosier tires are manufactured at a single facility in Lakeville, Indiana, by its sister company, Hoosier Tire & Rubber Corp. Hoosier is the largest race tire manufacturer in the world that specializes in manufacturing racing tires.

Defendant DMS is a motor sports sanctioning body and motor sports event company. DMS is a Delaware corporation with its principal place of business in Concord, North Carolina. DMS operates race tracks and owns such racing touring series as the World of Outlaw Sprint Car Series and Late Model Series. In 2005, DMS acquired United Midwest Promoters ("UMP"), another sanctioning body. UMP sanctions late model touring series and races at tracks, as well as modified weekly racing. UMP had a "Hoosier only" rule for years, which has continued under DMS's ownership.

B. Sanctioning Bodies in the Motor Sport Industry

Most dirt oval tracks are owned or leased by owners / promoters, who own or lease the dirt oval tracks and organize and conduct the races. Most track owners / promoters are members of a "sanctioning body" for at least one class of cars at their track. A sanctioning body is an organization that formulates and promulgates rules that govern the races which they sanction. Sanctioning bodies compete to attract race car drivers ("drivers") and fans to their races. In order to give the participants at its track the best opportunity to demonstrate their skills and encourage participation, a promoter or sanctioning body must provide a level playing field for the competitors.

The owners / promoters pay a sanctioning fee to the sanctioning body. It is desirable for track owners / promoters to be members of a sanctioning body because the sanctioning body creates incentives for drivers to drive in the races that they sanction. These incentives include enabling drivers to accumulate points, both nationally and regionally, race publicity, guarantee purses for the winning drivers, and the promulgation of rules familiar to the race drivers.

Sanctioning bodies often choose to utilize a "single tire rule," which requires that a specific tire type and brand be used on one or more wheel positions (i.e., right-and left-front, right-and left-rear) for one or more classes of cars for a series of races or racing seasons (e.g., "sprint cars," "modifieds," "hobby stocks," "sports compacts").

Relevant to this lawsuit is the fact that sanctioning bodies generally do not buy tires themselves, but rather establish the parameters of the type of tire that may be used in a race. Some rules may define the permissible tire by merely a bead size or other physical dimension; others may require that the tires at one or more wheel locations be a particular type or brand of tire.

Tire rules that do not require a specific brand of tire are called "open tire rules." Among the many decisions sanctioning bodies make in promulgating their rules are whether a particular race should have an open tire rule or a single tire rule (or some combination thereof). For example, DMS has adopted a Hoosier tire rule for most of its race tracks and series, but DMS utilizes an "open tire rule" for some of its World of Outlaw races.

A sanctioning company determines what tire rules to run for its various races and makes this decision based on its own self-interest, including how best to market its races. A sanctioning body may decide that it wants a single tire rule for all or most categories of its races.

Tires are not the only components of a race car subject to a single source or manufacturer rule. Sanctioning companies make rules that may specify, along with tires, carburetors, mufflers, or even the entire chassis. For example, USAC has a spec engine rule for its Ford Focus Midget Series, which requires that only Ford engines may be used. URC has a rule requiring a single brand of cylinder heads, the manufacturer of which is also a sponsor for URC. The International Race of Champions Series Racing, a series of ten (10) races in which the premier drivers from IRL, NASCAR's Busch Series, and NASCAR's cup series, specified that the racers would each run on identical cars.

C. Single Tire Rules and Exclusive Agreements

STA has supported single tire rules generally and believes that single tire rules have significant benefits for racing.*fn1 STA states on its website that it developed and promoted the concept of a "single tire" rule more than thirty (30) years ago to help sanctioning bodies create parity ...


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