Nova Designs, Inc. v. Scuba Retailers Ass'n

202 F.3d 1088, 2000 Daily Journal DAR 1491, 2000 Cal. Daily Op. Serv. 1031, 28 Media L. Rep. (BNA) 1570, 2000 U.S. App. LEXIS 1623, 2000 WL 135245
CourtCourt of Appeals for the Ninth Circuit
DecidedFebruary 8, 2000
DocketNo. 98-55358
StatusPublished
Cited by13 cases

This text of 202 F.3d 1088 (Nova Designs, Inc. v. Scuba Retailers Ass'n) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nova Designs, Inc. v. Scuba Retailers Ass'n, 202 F.3d 1088, 2000 Daily Journal DAR 1491, 2000 Cal. Daily Op. Serv. 1031, 28 Media L. Rep. (BNA) 1570, 2000 U.S. App. LEXIS 1623, 2000 WL 135245 (9th Cir. 2000).

Opinion

SCHWARZER, Senior District Judge:

This case is about an agreement between a corporation, having retailers as both members and customers, and a magazine publisher. We must decide whether one of the terms of this agreement, a restriction against carrying mail order advertising, can be found to be a per se violation of the antitrust laws.

Plaintiff Nova Designs, Inc. (doing business as Performance) sells scuba equipment and related items at retail through mail order catalogs. It advertises those items for sale at prices lower than those charged by competing retail stores and claims to be the first to offer such items [1090]*1090through a full-color upscale catalog. In this action, it charges defendant PADI (an acronym for Professional Association of Dive Instructors) with conspiring to deny Performance access to the market for scuba gear. PADI is a for-profit corporation providing retail dive shops and diving instructors, who are its members and also its customers, supplies and services, including training of scuba diving instructors and diver certification cards, as well as group insurance, travel programs, and diver training. Through the PADI Retail Association, a division of PADI, it also teaches small businesses to operate dive stores successfully, a service for which the stores pay.

In this action, Performance charges that PADI (and other defendants who have since been dismissed) violated §§ 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2) and the Cartwright Act (Cal. Bus. & Prof.Code § 16700-16770), and engaged in tortious interference with business relations and unfair competition. It generally charges that PADI’s retail members participated in a conspiracy to boycott any scuba entity that dealt with Performance and other discount mail order retailers by refusing to buy products from manufacturers who sold to Performance and refusing to carry magazines that sold advertising to Performance. More specifically, it contends that the retailers refused to deal with PADI unless PADI pressured Rodale Press, Inc., publisher of a new scuba diving magazine, not to accept advertising from Performance in its magazine.

The district court granted summary judgment for PADI on all counts. It held that Performance had waived any claim under the rule of reason and therefore applied a per se analysis under the Sherman Act. Finding that Performance had failed to come forward with evidence of any agreement between PADI’s retailer members or between those members and Rodale or with evidence that PADI exercised market power or closed off access to the market necessary for effective competition, it held that Performance’s claims failed. We have jurisdiction under 28 U.S.C. § 1291 and review the grant of summary judgment de novo. See Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.1996).

I. APPLICATION OF THE PER SE ANALYSIS

In its motion for summary judgment, PADI contended in essence that there was no evidence that it participated in any conspiracy. In its opposition, Performance argued only that PADI’s agreement with Rodale was unlawful per se and made no claim that the agreement or any of PADI’s conduct was subject to rule of reason analysis. As the district court put it, “Throughout its papers on these motions Performance does not raise any claim the evidence shows an unreasonable restraint of trade under a rule of reason analysis.” As a result, it found that Performance abandoned any claim under the rule of reason and analyzed its claims under the per se test of § 1.

Performance does not dispute the district court’s characterization but places responsibility for its failure to arg-ue rule of reason analysis on PADI’s failure to argue rule of reason in its motion for summary judgment. That motion was based on the absence of evidence of any illegal agreement or conspiracy. The burden was on Performance, if it sought to press a claim under the rule of reason, to come forward with evidence raising a triable issue under the rule of reason, i.e., evidence bearing on market power, injury to competition, and economic sense. See Adaptive Power Solutions v. Hughes Missile Sys., 141 F.3d 947, 951-52 (9th Cir.1998). Having failed to do so in the district court, it cannot now attack the judgment on rule of reason grounds. See Image Technical Serv., Inc. v. Eastman Kodak Co., 903 F.2d 612, 615 n. 1 (9th Cir.1990) (“Appellants ... argue that Kodak’s conduct is illegal under a rule of reason analysis. We do not consider this argument because appellants failed to raise it in response to Kodak’s motion for [1091]*1091summary judgment in the district court.”); Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir.1999) (“The difficulty for Students, however, is that they failed to present this contention to the district court; it first appears in their opening brief on appeal. As a general rule, we will not consider arguments that are raised for the first time on appeal.”). Accordingly, the issue we review is whether Performance has raised a triable issue that PADI’s conduct was a per se violation of the Sherman Act.

II.. THE RODALE AGREEMENT

On January 13, 1992, PADI entered into an agreement with Rodale. About to publish a new diving magazine, Rodale sought access to PADI’s membership and customer database to solicit subscriptions. In return for making this confidential information available, PADI would receive free advertising in Rodale’s magazines. The agreement provided that “Rodale will establish its advertiser policies in a manner that acknowledges that scuba equipment requires training for safe use, that Rodale supports the dive industry standard that scuba equipment should be sold only to certified divers who can provide proof of certification at the point of purchase.” A “no mail order advertising” policy was important to PADI for two reasons. First, the database it furnished Rodale included information it received in confidence from its member-retailers, including the identity of their customers to whom the Rodale magazine would be sent; release of that information could harm PADI’s relations with its customer-members who would object to use of the information to benefit mail order sales. Second, PADI considered that the use of scuba life support equipment by persons who have not been certified exposes those persons to substantial danger, and mail order sellers cannot determine whether their purchasers are certified. Moreover, Rodale itself had determined, from market research, that most dive shops would not carry magazines that carried mail order advertising for scuba gear.

Notwithstanding the agreement, in March 1992, Rodale announced that it would accept an advertising insert from Performance, interpreting the no mail order restriction as limited to scuba life support equipment. Several retailers complained to PADI about this insert, at least one stating that mail orders lower prices and force retailers to compete. PADI communicated its concern to Rodale which then, in May 1992, again changed its policy, rejecting all mail order advertising. In July 1992, however, PADI terminated its agreement with Rodale.

In Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 97 S.Ct.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Dang v. San Francisco Forty Niners
964 F. Supp. 2d 1097 (N.D. California, 2013)
Sambreel Holdings LLC v. Facebook, Inc.
906 F. Supp. 2d 1070 (S.D. California, 2012)
In re High-Tech Employee Antitrust Litigation
856 F. Supp. 2d 1103 (N.D. California, 2012)
Pennsylvania Avenue Funds v. Borey
569 F. Supp. 2d 1126 (W.D. Washington, 2008)
Karoun Dairies Inc. v. Los Altos Food Products Inc.
107 F. App'x 785 (Ninth Circuit, 2004)
Kingray, Inc. v. National Basketball Ass'n
188 F. Supp. 2d 1177 (S.D. California, 2002)
Tuolumne v. Sonora Community Hospital
236 F.3d 1148 (Ninth Circuit, 2001)
Nova Designs, Inc. v. Scuba Retailers Association
202 F.3d 1088 (Ninth Circuit, 2000)

Cite This Page — Counsel Stack

Bluebook (online)
202 F.3d 1088, 2000 Daily Journal DAR 1491, 2000 Cal. Daily Op. Serv. 1031, 28 Media L. Rep. (BNA) 1570, 2000 U.S. App. LEXIS 1623, 2000 WL 135245, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nova-designs-inc-v-scuba-retailers-assn-ca9-2000.