Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Caddies whiff on sponsor endorsement suit against PGA Tour, (Feb 11, 2016)

By Linda O’Brien, J.D., LL.M.

In a class action suit filed by professional golf caddies over their uncompensated endorsement services provided to tour sponsors, the caddies failed to propose plausible product markets to pursue Sherman Act claims against the tour organizer, the federal district court in San Francisco has ruled. Thus, the tour organizer’s motion to dismiss was granted (Hicks v. PGA Tour, Inc., February 9, 2016, Chhabria, V.).

PGA Tour, Inc. organizes and promotes tours of professional golf tournaments held across the United States. Spectators in attendance view the tournament live, and tournaments are generally televised, broadcast on the Internet, and viewed on video-on-demand platforms. William Michael Hicks and Kenneth Harms are caddies for professional golfers who compete in professional golf tournaments organized and promoted by PGA Tour, Inc.

In February 2015, Hicks and Harms filed a putative class action complaint against the PGA Tour, asserting claims for right of publicity and misappropriation of likeness, breach of contract, unjust enrichment, duress, and violations of Sections 1 and 2 of the Sherman Act, Lanham Act, and California’s Unfair Competition Law. Specifically, the caddies alleged that they were compelled to wear “bibs” which displayed the logos of corporate tour sponsors without compensation during professional golf tournaments promoted by the PGA Tour.

Antitrust claims. The court found that the caddies failed to state a plausible product market. The caddies alleged that the two product markets in which the PGA committed antitrust violations were the “endorsement market” and the “live action advertising market.” The endorsement market was described as the national market for the endorsement of products and services by participants in professional golf tournaments. The caddies described the live action advertising market as the national market for in-play or in-action commercial advertising at professional golf events between commercial breaks.

According to the court, the allegations that these two markets were meaningfully distinct from other forms of advertising to golf fans was not plausible. Companies that wish to advertise products to fans of professional golf can do so in a variety of ways: on television, in magazines, on posters, and on the Internet. To pursue a violation of the antitrust laws, the caddies must allege facts to show that the different methods of advertising to golf fans were not reasonably interchangeable. The caddies alleged no such facts and the endorsement and live action advertising markets could not be so narrowly defined as to include only in-play endorsements and advertising and not endorsements and advertisements communicated by other media.

Breach of contract. Additionally, the caddies have no breach of contract claim since a reasonable interpretation of the form contract they signed to participate in PGA tournaments was that they agreed the PGA could make them wear bibs. According to the court, although the contract imposes dress and uniform requirements, the language of the contract does not explicitly mention bibs. However, the caddies conceded that the PGA Tour has required caddies to wear bibs for decades and each caddie wears an identical bib during a given tournament. Since the bib has been a primary part of the uniform that the PGA requires caddies to wear for decades, no reasonable person signing the contract would believe he retained the right not to wear a bib during a tournament.

Right of publicity. Finally, the court determined that the caddies failed to state a right to publicity claim. The contracts that the caddies sign before participating in tournaments allow the PGA to require them to wear bibs. Therefore, the caddies have consented to the use of their images at tournaments to display what is on the bibs. In the contracts, the caddies also assign their media rights to the PGA with respect to their participation in PGA events. However, the PGA player’s handbook expressly protects the players’ right to seek endorsements. Since caddies can still seek endorsements, there is no inconsistency between consent by a caddie to wear a bib and retention by the caddie of “marketing rights,” the court concluded.

The case is No. 15-cv-00489-VC.

Attorneys: Arthur R. Miller (The Lanier Law Firm) for William Michael Hicks. Anthony J. Dreyer and Jeffrey Mishkin (Skadden Arps Slate Meagher Flom LLP) for PGA Tour, Inc.

Companies: PGA Tour, Inc.

Cases: Antitrust CaliforniaNews