UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF NEW YORK
April 3, 1980
William P. COONEY, Plaintiff,
AMERICAN HORSE SHOWS ASSOCIATION, INC., Defendant
The opinion of the court was delivered by: CANNELLA
MEMORANDUM AND ORDER
The defendant's motion for summary judgment is granted. Fed.R.Civ.P. 56.
Plaintiff, a horse trainer who is a member of defendant American Horse Shows Association, Inc. ("AHSA"), brings this antitrust action challenging his suspension pursuant to certain disciplinary regulations of the defendant. Specifically, he contends that the defendant's "Rule on Drugs and Medication" ("Drug Rule") creates a standard of liability which is unreasonable and arbitrary, and therefore violates sections one and two of the Sherman Act, 15 U.S.C. §§ 1, 2, and the common law of New York.
The AHSA is a not-for-profit membership organization organized under the laws of New York, for the purpose of promoting the best interests and fairness of shows and competitions recognized by it. To achieve this goal, the AHSA promulgates and enforces rules governing competitions. Affidavit of James J. Fallon at 2 (filed Oct. 25, 1978).
The regulation challenged in this action, Rule III, Part 1, Section 5, prohibits the administration of forbidden drugs and medications to horses participating in shows. In pertinent part the rule provides:
No horse shall be shown in any class at a show recognized by the Association if it has been administered in any manner any forbidden substance. A forbidden substance is any stimulant, depressant, tranquilizer or local anesthetic which might affect the performance of a horse (stimulants and depressants are defined as medications which stimulate or depress the circulatory, respiratory, or central nervous systems).
Trainers in the absence of substantial evidence to the contrary are responsible for a horse's condition and to know all the rules and regulations of the Association, and, the penalty provisions of said rules.
A trainer of a horse found to have received such forbidden substance shall be subject to whatever penalty is assessed by the Hearing Committee and may be fined no more than $ 1,000.00 and may be suspended from all competition in recognized shows for a period of one year for the first offense, said suspension to be served at any time at the discretion of the Hearing Committee. The horse may be suspended for any period of time specified by the Hearing Committee.
American Horse Shows Association Rule III, Part 1, Section 5(a), (c), (d).
On September 28, 1978, plaintiff was suspended from participating in recognized shows for two months and fined $ 300.00 for violating this rule.
The facts surrounding plaintiff's suspension are as follows: In January, 1978, plaintiff was employed as a trainer of show horses and riders by Hunterdon, Inc., a training facility located in Pittstown, New Jersey. He was retained to train a horse named Gozzi, which participated in the Pine Hill Riding Center Competition in Framingham, Massachusetts, on April 23, 1978. Plaintiff was present at the show, and was responsible for the preparation of Gozzi and his owner-rider, Bonnie Blake, for the competition. Gozzi and his rider won every competition in which they were entered. In accordance with its regular testing program, and with plaintiff's consent, representatives of the AHSA took blood samples from Gozzi for the purpose of determining whether any foreign drugs had been administered. The test indicated that Gozzi had received an injection of reserpine, a prohibited drug which has a tranquilizing effect on the animal.
On May 30, 1978, plaintiff was notified by the AHSA that charges had been filed against him alleging that he had violated the AHSA's Drug Rule.
He was informed that a hearing would be scheduled, and that his attorney could represent him at the hearing. The hearing was held on September 27, 1978, but plaintiff's counsel did not attend. At the hearing, evidence was produced that reserpine was present in the blood of Gozzi at the time of the competition. Plaintiff testified that he was present at the competition, and as trainer was responsible for the condition and performance of Gozzi, and further that he knew the rule regarding trainer responsibility. He denied, however, any responsibility for or knowledge of the drugging, and further stated that he had detected no change in the horse's condition that would have alerted him to the drugging.
The day following the hearing, the Hearing Committee, which consisted of five persons, none of whom were active trainers who compete with plaintiff, unanimously decided to suspend and fine the plaintiff. In a letter to plaintiff, the Committee noted that in deciding upon an appropriate penalty it took into account that there was no evidence that plaintiff administered or knew of the administration of the prohibited substance. The letter further states: "The Committee also noted, however, the standard of responsibility required of trainers under the provisions of Rule III, Part 1, Section 5(b) and (c) and that no substantial evidence was introduced at the hearing to indicate that you, as trainer, were not responsible for the condition of the horse "GOZZI" at the Pine Hill Horse Show." Affidavit of Edward S. Bonnie at 5 (filed October 28, 1978).
During the period of plaintiff's suspension, from October 2 to December 2, 1978, the regulations of the AHSA required all sponsors and managers of AHSA recognized horse shows to bar his participation. On October 20, 1978, plaintiff instituted the present action. In his original complaint, plaintiff sought both temporary and preliminary relief enjoining his suspension. The Court denied plaintiff's application for a preliminary injunction, finding that plaintiff failed to make a clear showing of threat of irreparable injury. Memorandum and Order, Cooney v. American Horse Shows Association, Inc., 78 Civ. 4982 (JMC) (filed Oct. 26, 1978).
Thereafter, plaintiff filed an amended complaint in which he seeks declaratory and injunctive relief as well as treble damages. He contends that (1) the AHSA has engaged in a group boycott which is unlawful per se under section one of the Sherman Act; (2) the drug rule standard of liability which holds a trainer liable where there is no evidence that he knew or was involved in the wrongdoing is arbitrary and unreasonable, and thus violates the rule of reason; (3) the AHSA has monopolized the horse show industry in the United States in violation of section 2 of the Sherman Act; and (4) the arbitrary and unreasonable suspension violates the common law of the State of New York.
The defendant has moved to dismiss the complaint for failure to state a claim upon which relief can be granted, or alternatively, for summary judgment.
Jurisdiction is based upon the presence of a federal question, 28 U.S.C. § 1331(a), and diversity of citizenship, 28 U.S.C. § 1332(a).
Section One Claims
It is clear that the AHSA, as a not-for-profit membership organization, may promulgate reasonable rules and regulations to effectuate the purpose for which it was formed, namely, to promote the fairness and integrity of competitions recognized by it. Molinas v. National Basketball Association, 190 F. Supp. 241, 244 (S.D.N.Y.1961). In this respect the AHSA is similar in nature and purpose to other sport associations which seek to regulate competition for the mutual benefit of the competitors and in the hope of continuing public interest in the sport. But even such sport associations, with the exception of major league baseball, are subject to the antitrust laws.
Section one of the Sherman Act prohibits only combinations or agreements which unreasonably restrain trade. Board of Trade of Chicago v. United States, 246 U.S. 231, 38 S. Ct. 242, 62 L. Ed. 683 (1917); Standard Oil Co. v. United States, 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619 (1911). Courts have recognized that certain agreements or practices that have a pernicious effect on competition and lack any redeeming quality are conclusively presumed to be unreasonable and thus are illegal per se. See Northern Pacific v. United States, 356 U.S. 1, 5, 78 S. Ct. 514, 518, 2 L. Ed. 2d 545 (1957). Plaintiff contends that his suspension by the AHSA constitutes a "group boycott" or concerted refusal to deal, and is therefore illegal per se. See Klor's v. Broadway-Hale Stores, 359 U.S. 207, 79 S. Ct. 705, 3 L. Ed. 2d 741 (1959); Fashion Originators' Guild v. F.T.C., 312 U.S. 457, 61 S. Ct. 703, 85 L. Ed. 949 (1941).
The Court concludes, however, that plaintiff's suspension pursuant to the disciplinary rules of the AHSA cannot be characterized as a group boycott at least not a boycott which has traditionally been considered illegal per se.
Neeld v. National Hockey League, 594 F.2d 1297 (9th Cir. 1979); Hatley v. American Quarter Horse Association, 552 F.2d 646 (5th Cir. 1977). The Second Circuit has indicated that " "(w)hile the boycott concept is infinitely expandable, the per se doctrine ought not to be.' " Oreck Corp. v. Whirlpool Corp., 579 F.2d 126, 131 (2d Cir.), cert. denied, 439 U.S. 946, 99 S. Ct. 340, 58 L. Ed. 2d 338 (1978) (quoting L. A. Sullivan, Antitrust 256 (1977)). The allegations by plaintiff in his pleadings do not illustrate horizontal restraints which can be characterized as "naked restraints" of trade with no purpose except stifling competition. White Motor Co. v. United States, 372 U.S. 253, 83 S. Ct. 696, 9 L. Ed. 2d 738 (1963). In the instant case, competitors did not agree to exclude plaintiff from the market of trainers at competitions recognized by the AHSA in order to insulate themselves from competition. Indeed, the AHSA drug rule is designed to improve and foster fair competition at the trainer market level, and does not insulate show competitors, be they trainers, owners or riders, from competition. See Smith v. Pro Football, Inc., 193 U.S. App. D.C. 19, 593 F.2d 1173, 1179-82 (D.C.Cir.1978); North American Soccer League v. National Football League, 465 F. Supp. 665, 672-75 (S.D.N.Y.1979).
Therefore, the Court concludes that the rule or reason must be applied to determine whether the AHSA's enforcement of the drug rule unreasonably restrained trade. Under the rule of reason, the Court must evaluate the challenged rule in light of the factual context of the particular industry, the history of the restraint, and the reason for its imposition, National Society of Professional Engineers v. United States, 435 U.S. 679, 98 S. Ct. 1355, 55 L. Ed. 2d 637 (1978), in order to determine whether on balance its anticompetitive effects outweigh its procompetitive benefits. Smith v. Pro Football, Inc., supra, 593 F.2d at 1183; Paralegal Institute, Inc. v. American Bar Association, 475 F. Supp. 1123, 1129 (E.D.N.Y.1979); North American Soccer League, supra, 465 F. Supp. at 675. Clearly such disciplinary action can be considered unreasonably anticompetitive in effect only if the regulation is enforced in an arbitrary or discriminatory manner, or where the restraint is broader than reasonably necessary to accomplish the legitimate goal of the regulation.
The record before the Court amply demonstrates the reasonableness of the rule in question.
The procompetitive benefits of the rule clearly predominate. Given the conditions at competitions, where owners, riders, trainers and their personnel have access to the horse, enforcement of the drug rule would be all but impossible if the individual who has accepted responsibility for the horse's condition could not be held accountable in the absence of substantial evidence that he is not responsible for the drugged condition. Fogt v. Ohio State Racing Commission, 3 Ohio App.2d 423, 210 N.E.2d 730 (1965). Contrary to plaintiff's contention, this stringent standard of liability is necessary to accomplish the legitimate goals of the Drug Rule. Otherwise, the trainer could simply escape liability by denying any knowledge of the drugging. The presumption of the trainer's responsibility for the drugging shifts the burden of proof to the trainer, but the rule on its face is rebuttable by substantial evidence that the trainer is not responsible for the drugged condition. In effect, the rule encourages the trainer to exercise a high degree of care and control over the horse, not unlike regulations which punish the trainer's failure to guard his horse. See, e.g., Maryland Racing Commission v. McGee, 212 Md. 69, 128 A.2d 419 (1957); Commonwealth v. Webb, 1 Pa.Cmwlth. 151, 274 A.2d 261 (1971). In this respect the present standard does not differ greatly from the supposedly less stringent negligence standard that plaintiff advocates. The Hearing Committee recognized at the time it imposed the suspension that no evidence established that plaintiff administered or knew of the administration of the drug. This merely indicates, however, that the Committee believed that the plaintiff had not met the high standard of care created by the drug rule. Plaintiff was aware of this standard of trainer responsibility. He accepted responsibility for the horse's condition, not just for its preparation for the competition. Since he was present and responsible for the horse's condition, he, more than anyone else, was in a position to know exactly who administered the drug. If that person was a subordinate, plaintiff was responsible for that conduct. If that person was a third party, plaintiff, as the person responsible for guarding and controlling the horse, was in the best position to prevent the drugging or discover who in fact did it, and in that way rebut the presumption of his responsibility for the drugging. In any event, the Court finds that plaintiff failed to raise any material factual issues in replying to the defendant's motion,
and therefore the Court concludes that defendant is entitled to summary judgment as a matter of law on the section one claims.
Section Two Claims
Count II of plaintiff's first amended complaint alleges that the defendant monopolized the horse show industry in the United States in violation of section two of the Sherman Act. The Court recognizes that meaningful participation in the multimillion dollar horse show industry depends on membership in the AHSA. But even a single organization which exercises a dominant position in a given market does not violate section two unless it has "acquired or maintained (its) strategic position, or sought to expand (its) monopoly, or expanded it by means of those restraints of trade which are cognizable under § 1." United States v. Griffith, 334 U.S. 100, 106, 68 S. Ct. 941, 945, 92 L. Ed. 1236 (1948); accord, Hatley v. American Quarter Horse Association, supra, 552 F.2d at 654-55; Deesen v. Professional Golfers' Association of America, 358 F.2d 165 (9th Cir.), cert. denied, 385 U.S. 846, 87 S. Ct. 72, 17 L. Ed. 2d 76 (1966). Since the Court finds that the AHSA through its rules and regulations promotes competition rather than restrains it, the defendant is entitled to summary judgment as a matter of law on Count II. See Paralegal Institute, Inc. v. American Bar Association, supra, 475 F. Supp. at 1131.
Common Law Claims
Plaintiff contends that the common law of the State of New York proscribes the suspension of a member from a membership organization when there is no evidence of the member's knowledge or involvement in the violation. Lamborn v. New York Cotton Exchange, 203 App.Div. 565, 197 N.Y.S. 57 (1st Dep't 1922).
Even under this interpretation of Lamborn, supra, which is inaccurate since the rule in that case proscribed only "conduct" by the member, and not the acts of his employees taken without his knowledge,
the Court finds that there was sufficient evidence to sustain plaintiff's suspension under the standard of liability imposed by the drug rule, which the Court has already found to be necessary and reasonable. His suspension cannot be considered arbitrary or capricious, either in terms of the procedural protections afforded to him or the substantive standard of liability imposed upon him. Therefore, the defendants are entitled to summary judgment as a matter of law on plaintiff's state law claims.
Accordingly, the defendant's motion for summary judgment is granted. The Clerk of the Court is directed to prepare and enter a Judgment dismissing the amended complaint. Fed.R.Civ.P. 56.