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TRANS SPORT, INC., v. STARTER SPORTSWEAR

September 3, 1991

TRANS SPORT, INC., PLAINTIFF,
v.
STARTER SPORTSWEAR, INC., DEFENDANT.



The opinion of the court was delivered by: McAVOY, District Judge.

Background

Various professional sports organizations — Major League Baseball, the National Hockey League, the National Basketball Association and the National Football League, insofar as relevant here — possess the exclusive right to license the commercial use of their member teams' names, symbols, emblems, designs and colors on merchandise. The unauthorized use of these names, symbols, etc. subjects the user to money damages and injunctive relief.

Hundreds of manufacturers are licensed to produce merchandise of all sorts bearing the teams' trademarks, i.e., their names, symbols, etc.. See Vols. II and III to Defendant's Motion for Summary Judgment, Exhibits 14-22. Defendant Starter Sportswear, Inc., however, is, and has been for some time, the sole manufacturer of authentic official team jackets pursuant to licensing agreements between it and the above-mentioned professional sports organizations. As a result of these agreements, defendant has the exclusive right to manufacture and sell these authentic official team jackets on a nationwide basis. It is alleged that by virtue of these licensing agreements defendant has acquired a national monopoly in the manufacture and sale of the foregoing authentic official team jackets (hereinafter referred to as Starter team jackets).

In January 1986, plaintiff's predecessor-in-interest, the Stickley Corporation, entered into the business of selling Starter team jackets on a retail basis. After approximately six months in the retail business, Stickley decided that conditions existed which indicated that entering into the business of distributing Starter team jackets to other retailers on a nationwide basis would be financially lucrative. It therefore began purchasing large volumes of Starter team jackets for distribution to these retailers; the business apparently proved to be quite successful.

Subsequently, in March 1987, Starter's national sales manager advised Stickley that Starter would have to re-evaluate its relationship with Stickley if Stickley did not limit its resale of Starter team jackets to: (a) sales through a consumer catalog; (b) sales from Stickley's retail store; and (c) premiums on company-run stores. Thereafter, Starter refused to ship Stickley's Fall 1987 order of jackets unless Stickley agreed not to transship Starter products. Stickley refused claiming that such an agreement, in its view, violated the law. Starter then inserted the following conditions in its new order forms:

  No transshipments: Starter has a policy of selling
  only directly to selected retail outlets for
  resale by them at specified locations. Proposed
  sale at any new retail outlet requires advance
  written approval from Starter's Home Office.
  Resale or transshipments of our merchandise to an
  unauthorized location or to another business
  contravenes that policy and the items and
  conditions of sale and may result in non-shipment
  or termination of the retailer's business
  relationship with Starter.

Complaint at 5, ¶ 21. Starter has refused to deal with Stickley and plaintiff Trans Sport Inc. by not honoring orders from February 16, 1987 to the present day.

Annoyed at these turn of events, plaintiff, claiming the loss of substantial profits, commenced the present action, seeking treble damages and permanent injunctive relief, alleging that "Starter has intentionally used the monopoly power it has at the manufacturing level to eliminate Stickley as a competitor at the distributor-wholesaler level in violation of Section 2 of the Sherman Act." Additionally, plaintiff alleges (a) that "Starter's actions are intentionally taken to maintain artificially high prices at the consumer level in that they restrict supply, require retailers to place minimum orders, minimum reorders and to carry items of Starter merchandise which they cannot readily sell," (b) that Starter has knowingly maintained "monopoly power at the distributor-wholesaler level by anticompetitive conduct directed at [plaintiff]," and (c) that because of Stickley's refusal to deal plaintiff "has been unable . . . to obtain and supply the goods necessary to service the retail market for NHL, NBA, MLB, and NFL licensed team jackets." Complaint at 6, ¶¶ 25-27.

Defendant moved to dismiss the complaint pursuant to Rule 12(b)(6) arguing (a) that the complaint fails to define and plead facts delineating the relevant product or geographic market, (b) that the complaint fails to allege anti-competitive conduct, (c) that plaintiff lacks standing to claim damages or injunctive relief in its own right, and (d) that plaintiff has failed to allege antitrust injury.

Upon review of the complaint in light of pertinent case law, and after hearing oral argument and considering defendant's reply memorandum, this court in March 1989 denied defendant's motion. In short, the court noted that, under its understanding of the law, plaintiff's allegations (essentially that defendant as a monopolist manufacturer and distributor has impermissibly refused to deal with it so as to allow it to compete with defendant at the distribution level) stated a cognizable claim under section 2 of the Sherman Act, which plaintiff has standing to pursue. Memorandum-Decision and Order (filed March 21, 1989). The court determined that plaintiff had adequately pleaded the relevant product market, see id. at 5-7, anticompetitive conduct, id. at 8-9, standing to sue, id. at 10-11, and anti-trust injury, id. at 11-12.

Some two years later, after the completion of discovery defendant has moved for summary judgment dismissing the action arguing first that defendant does not have monopoly power in the relevant product market which it defines to be broader than authentic official satin NFL, NHL, NBA and MLB team jackets. In this regard, defendant contends that "the facts demonstrate [that] plaintiff's bald allegations concerning the unavailability of comparable, substitute products are false, and the caselaw clearly indicates that the relevant product market encompasses many products in addition to Starter's satin team jackets." Defendant's Memorandum of Law at 42. Second, defendant argues essentially that, even if it possesses monopoly power, and here it concedes that it possesses a natural monopoly over the distribution of the jackets it manufactures, the maintenance of its distribution system, whereby it retains the power to choose its retailers so as to be able to market its products as it sees fit, has not yielded unreasonable anti-competitive effects.

The court's great discomfort with this case, and particularly with plaintiff's position, in effect that a retailer should be able to tell the manufacturer/distributor how to run its business so that the retailer can enjoy greater profits, prompted the court to require additional briefing through an order which read as follows:

    In order to prevail on a monopolization claim
  under section 2 of the Sherman Act, a plaintiff
  must prove that the defendant has wilfully
  acquired or maintained monopoly power in the
  relevant market. See Aspen Skiing Co. v. Aspen
  Highlands Skiing Corp., 472 U.S. 585, 596 n. 19,
  105 S.Ct. 2847, 2854 n. 19 [86 L.Ed.2d 467] (1985);
  Volvo North America Corporation v. Men's
  International Professional Tennis Council,
  857 F.2d 55, 73 (2d Cir. 1988); Belfiore v. New York Times
  Co., 826 F.2d 177, 180 (2d Cir. 1987), cert.
  denied, [484 U.S. 1067] 108 S.Ct. 1030 [98 L.Ed.2d
  994] (1988). Assuming for argument's sake that
  defendant possesses monopoly power in the relevant
  product market as defined by plaintiff, given that
  licensing agreements secured by defendant from
  various professional sports organizations are the
  source of defendant's exclusive right to
  manufacture authentic official team jackets, can
  defendant be deemed to have acquired or maintained
  that monopoly power wilfully rather through growth
  or development as a consequence of business
  acumen?, and if so, how? Moving on, assuming for
  argument's sake that defendant possesses monopoly
  power at the product distribution level, does, or
  under what circumstances would, such a monopolist
  have a duty to supply its product to a retailer so
  that the retailer may compete as a distributor.
  Viewed slightly differently, does, or under what
  circumstances would, the (assumed) monopolist's
  refusal to supply the retailer with its product so
  that the retailer does not transship to retailers
  not of the manufacturer's choosing, constitute
  wilful maintenance of monopoly power? In other
  words, as to the last question, what does wilful
  maintenance mean and what must be proved?

The briefing requested has been submitted. Suffice it to say that at this juncture the court has substantial doubts about the correctness of its decision denying defendant's motion to dismiss under Rule 12(b)(6). Nevertheless, the case has proceeded forward through discovery, and, notwithstanding the extensive briefing undertaken by the ...


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