Case Information
*4 GOULD, Circuit Judge:
We must decide whether a complaint alleging a national dog club’s policy banning members that register their dogs with an alternative club raises cognizable claims of group boycott pursuant to the Sherman Act. We must also decide whether Appellants’ claim of false advertising pursuant to the Lanham Act was properly dismissed for lack of standing after trial.
The Jack Russell Terrier Network of Northern California (“JRTNNC”) and individual Jack Russell Terrier owners and breeders Claudia Sprague and Georgia Fisher (collectively “Appellants”) appeal the district court’s judgment, following a dismissal of antitrust claims on motion, and a dismissal of false advertising claims after bench trial, in favor of the Jack Russell Terrier Club of America (“JRTCA”). The JRTNNC, a former regional affiliate of the JRTCA, seeks declaratory and injunctive relief regarding a JRTCA policy known as the “Conflicting Organization Rule” (“COR”), which provides that JRTCA affiliates and members will recognize only the JRTCA registry of Jack Russell Terriers, and will not register their dogs with conflicting organizations such as the Ameri- can Kennel Club (“AKC”). The Appellants argue that the COR and its enforcement mechanisms constituted a “group boycott” and “false advertising” in violation of the Sherman and Lanham Acts, and unlawfully subjected the JRTNNC to liability from those injured by the policy.
The district court granted the JRTCA’s motion to dismiss the Appellants’ Sherman Act claims. After a bench trial, the district court held that the Appellants lacked standing to raise a claim under the Lanham Act. The Appellants appealed the dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) and the trial ruling. The JRTCA cross-appealed the district court’s decision to deny the JRTCA any of its costs. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.
I
This case arises from a philosophical disagreement between groups of well-intentioned people dedicated to a breed of dog, the Jack Russell Terrier. A preliminary historical note is illu- minating: Jack Russell Terriers were first bred in the south of England in the mid-1800’s to hunt European red fox, both over and underground, for the sport of kings. The breed got its name from a renowned Nineteenth Century British hunts- man and breeder, Parson John Russell, known as “The Sport- ing Parson,” whose passion for fox hunting and working terriers was legendary. Russell developed and bred the partic- ular strain of white-bodied “fox” terriers now known as Jack Russell Terriers to emphasize their working and hunting abili- ties. [1]
The JRTCA is a national breed club and dog registry with standards aimed at preserving the working-dog characteristics and heritage of the Jack Russell Terrier. [2] Formed in 1976, the JRTCA is the largest organization and registry of Jack Russell Terriers in the world, and derives a substantial amount of income from interstate and foreign commerce in the Jack Rus- sell Terrier. [3] As its membership expanded, regional affiliates of the JRTCA formed, and were required to comply with the [1] For more, see generally D. Caroline Coile, The Jack Russell Terrier Handbook 1-14 (2000). JRTCA Constitution, Art. I, § 2(g), at www.terrier.com/jrtca/
constitution.php3 (last visited Apr. 25, 2005). For more on the JRTCA, see the JRTCA website at www.terrier.com. With regard to the Sherman Act claims that were dismissed pursuant
to Rule 12(b)(6) for failure to state a claim, we take the facts as alleged in the Appellants’ third amended complaint as true. With regard to the facts as pertinent to the Lanham Act claim of false advertising, the facts are as determined by the district court’s findings of fact after bench trial. In general, these facts are the same.
JRTCA’s constitution as terms of membership. The JRTCA promotes, runs, and sanctions national dog trials for the Jack Russell Terrier. The club affiliates host regional Jack Russell Terrier shows and trials for which the JRTCA provides certi- fied judges. The winners of the regional shows are eligible for the annual national JRTCA Jack Russell Terrier show. Jack Russell Terrier owners and breeders attend these JRTCA events to have their dogs compete in trial events and be judged in shows to the breed standard; to advertise, buy, and sell terriers; and to win awards. Awards are marks of excel- lence for dog breeders that they use to differentiate and pro- mote their kennels in future commerce. Only JRTCA members are allowed to participate in JRTCA events.
Until recently, the Jack Russell Terrier was not a breed rec- ognized by the AKC, the well-known umbrella registry for almost all types of pure-bred dogs in the United States. Con- sequently, unlike other breeds recognized by the AKC, there was no AKC registry of Jack Russell Terrier breeders or an AKC-breed certification by which potential owners could ver- ify the authenticity of prospective dogs. Aiming to remedy this omission, in 1991 a minority group of JRTCA members asked the AKC to recognize the Jack Russell Terrier as an official breed. They formed a “foundation stock” of dogs to stand as a base for a AKC dog registry and to be used to trace the pedigree of offspring. The AKC accepted the Jack Russell as an official AKC-certified breed in 1998.
The JRTCA opposed the AKC listing of Jack Russell Terri- ers, believing that an alternative all-breed kennel club stan- dard and registry was not in the best interests of the dog. The JRTCA emphasizes the working-dog characteristics of the breed, and believes that any kennel club standard would over time change the dog into a show breed, bred for form not func- Effective April 1, 2003, the official name of the AKC breed of Jack Russell Terrier was changed to the “Parson Russell Terrier.” 5287 tion. [5] The JRTCA undertook a campaign to discourage its members and the public from participating with the AKC, which included the adoption of the COR. [6] As part of its policy, JRTCA members who registered their dogs with the AKC had [5] AKC standards focus on creating a more uniform dog in size and color, with less emphasis on a dog’s “working” traits. AKC dogs are certified by litter at birth by the pedigree of their parents. In contrast, the JRTCA requires the terrier to have reached one year of age, have a traceable pedi- gree going back at least four generations, and veterinarian’s certificate attesting that the dog has no inherited defects. A physical difference between the AKC’s breed standard and the JRTCA’s breed standard is found in two inches of height: a JRTCA Jack Russell Terrier must mea- sure between ten and fifteen inches, while an AKC Parson Russell Terrier must measure between twelve and fifteen inches. At the end of the JRTCA constitution is the following notice:
IMPORTANT
The JRTCA is adamantly opposed to recognition of the Jack Rus- sell Terrier by ANY kennel club. The JRTCA believes that inclu- sion in any all-breed registry is detrimental to the protection and preservation of the Jack Russell. The JRTCA’s unique registry, with its strict inbreeding limitations and health requirements, working certificate, sanctioned judge and field trial programs, and breeder’s code of ethics are all designed to preserve the Jack Russell’s unique working ability, great intelligence, sound physi- cal structure, and broad standard so necessary to preserve this unspoiled type, or strain, of working terrier known as the Jack Russell.
The JRTCA feels so strongly about the impact of kennel club rec- ognition on the future of the JR that persons participating in any organization or registry in conflict with JRTCA goals and objec- tives are not accepted for membership in the JRTCA.
The JRTCA, at http://www.terrier.com/jrtca/constitution.php3 (last visited Apr. 25, 2005). There is a similar notification on the JRTCA’s application for membership. The COR provided that affiliates and members of the JRTCA will rec-
ognize only the JRTCA-terrier registry, will not become members in con- flicting organizations, will not register their terriers with conflicting organizations, and will not exhibit their terriers at JRTCA-sanctioned events if they violate the COR.
their JRTCA membership terminated and were not permitted to participate in JRTCA dog shows.
Georgia Fisher and Claudia Sprague, two of the Appellants, are former Jack Russell Terrier breeders who were barred from competing in JRTCA-sanctioned terrier trials after regis- tering their dogs with the AKC. In addition to being denied access to JRTCA dog trials and shows, the JRTCA “black- listed” members who registered with the AKC by listing them in the JRTCA’s bimonthly magazine dedicated to Jack Rus- sell Terriers, True Grit . [8] Both Fisher and Sprague were “blacklisted” in True Grit . The Appellants allege that after the listing other Jack Russell Terrier owners and breeders would not associate with Fisher, breed with her dogs, or buy her puppies.
Fisher and Sprague then independently consulted an attor- ney who wrote letters to the JRTNNC threatening legal action if the JRTNNC refused to allow the breeders to participate in future JRTNNC dog shows. [9] The JRTNNC in turn contacted the JRTCA, requesting indemnification from the national organization if Fisher or any other breeder sued the JRTNNC for enforcing the JRTCA’s COR, and denying those owners the ability to participate in JRTNNC events. The JRTCA responded that, while it would continue to require the JRT- NNC to comply with JRTCA regulations and to enforce them against members who registered dogs with the AKC, the JRTCA would not indemnify the JRTNNC from any possible liability. The JRTNNC concluded that it could not subject itself and its members to potential liability without indemnifi- The so-called “blacklisting” of breeders refers to a listing in True Grit with the caption: “The following breeders/owners are previous JRTCA members who to our knowledge have registered their terrier(s) with the AKC.” As discussed above, for breeders, the dog show circuit is a major
means by which to differentiate their kennels. A dog that wins show awards and honors increases its value for sale or breeding, as well as the value of its offspring.
cation, and therefore would permit AKC-registered owners to participate in its regional terrier events. The JRTCA then ter- minated the JRTNNC’s charter.
The JRTNNC filed suit in the United States District Court for the District of Northern California, naming the JRTCA and the AKC as defendants, and claiming that the JRTCA’s COR was an illegal group boycott of AKC dog owners and breeders in violation of § 1 of the Sherman Act, 15 U.S.C. § 1.
The AKC moved to dismiss based on the fact that the JRT- NNC had failed to point to any AKC conduct causing the JRTNNC injury. The JRTCA also moved to dismiss. The dis- trict court granted both motions and dismissed the action, granting leave for the JRTNNC to amend its complaint as against the JRTCA.
The JRTNNC filed a second amended complaint, adding Sprague and Fisher as co-plaintiffs. The JRTNNC then filed a third amended complaint, adding the Jack Russell Terrier Club of Great Britain as a named co-defendant, as well as two regional JRTCA affiliates, the California South Coast Jack Russell Terrier Club (“SCJRTC”) and the Jack Russell Terrier Club of Central California (“JRTCCC”). The third amended complaint requested declaratory and injunctive relief, and raised seven claims asserting a “group boycott” in violation of the Sherman Act, a claim of “false description” in violation of the Lanham Act, and two state law claims of unfair compe- tition.
The JRTCA again moved for a Rule 12(b)(6) dismissal. The district court granted the motion as to the JRTNNC’s Sherman Act claims, but denied the motion as to the Lanham The Jack Russell Terrier Club of Great Britain settled with the Appel- lants before the second motion to dismiss, agreeing to drop their own COR as part of the terms of that settlement.
Act claim and the California state law claims. Regarding the Sherman Act “group boycott” claims, the district court found that the JRTNNC had not alleged that the JRTCA-affiliated local clubs pursued different economic goals than the national JRTCA, and that this lack of multiple actors was fatal to the Plaintiffs’ Sherman Act claims under Copperweld Corp. v. Independence Tube Corp. , 467 U.S. 752 (1984). The motion to dismiss was denied with regard to the Lanham Act claim and California state law unfair competition claims, and those issues proceeded to trial.
After a seven-day bench trial, the district court concluded that, while the “blacklisting” advertisement in True Grit con- stituted commercial speech which could violate the Lanham Act, the JRTCA’s actions did not violate the Lanham Act or the California Business and Professions Code, § 17200 et seq. , because its actions were targeted at the AKC, not the Plaintiffs. The court held that the JRTNNC was not a com- mercial competitor of the JRTCA, and therefore lacked stand- ing to bring a Lanham “false advertising” claim. This timely appeal of both the partial Rule 12(b)(6) dismissal and trial rul- ing on the merits followed. [11]
The JRTCA also filed a bill of costs for approximately $18,000 subsequent to the district court’s ruling. The JRT- NNC moved to have the court review those costs. The district court denied the JRTCA’s costs in their entirety, and the JRTCA timely cross-appealed that denial.
II
We first address the district court’s dismissal of the Appel- lants’ Sherman Act claims. [12]
The district court also ruled against the Appellants on their related
state law unfair competition claims. Those claims were not appealed.
We review the dismissal of a Sherman Act § 1 claim pursuant to Rule
12(b)(6) de novo.
Les Shockley Racing, Inc. v. Nat’l Hot Rod Ass’n.
, 884
A
[1]
Section 1 of the Sherman Act prohibits “[e]very con-
tract, combination in the form of trust or otherwise, or con-
spiracy, in restraint of trade or commerce.” 15 U.S.C. § 1.
Section 1 is intended to prohibit actions that unreasonably
restrain competition.
See Bus. Elecs. Corp. v. Sharp Elecs.
Corp.
,
ject to a per se standard, or alternatively, § 1 liability might be imposed
for concerted action which violates the “rule of reason” standard.
See Pal-
adin Assocs., Inc. v. Montana Power Co.
,
tion and its wholly owned subsidiaries were legally incapable of “conspiring” for the purposes of § 1. 467 U.S. at 771 (explaining that a parent corporation and its subsidiary “have a complete unity of interest . . . . [T]here is no sudden joining of economic resources that had previously served different interests . . . .”). The Court reasoned that the coordinated activity of parties lacking independent sources of economic power and separate interests does not warrant judicial scru- tiny. Id. at 770-71. For example, the “officers or employees of the same firm do not provide the plurality of actors impera- tive for a § 1 conspiracy” because they are “not separate eco- nomic actors pursuing separate economic interests, so agreements among them do not suddenly bring together eco- nomic power that was previously pursuing divergent goals.” Id. at 769. Rather, an action requires scrutiny under § 1 of the Act if it “deprives the marketplace of the independent centers of decision making that competition assumes and demands.” Id.
claims.
Id.
at 1155-56. We agree that the district court properly considered
that the rule of reason is to be applied “where the economic impact of the
challenged practice is not obvious.”
Harkins Amusement Enters., Inc. v.
Gen. Cinema Corp.
, 850 F.2d 477, 486 (9th Cir. 1988) (quoting
Dimid-
owich v. Bell Howell
,
B Whether a national breed club and registry and several
of its regional affiliates are capable of conspiring as separate
entities under § 1 of the Sherman Act is a question of first
impression. Although the single-entity inquiry is unique to the
facts of each case,
Williams
, 999 F.2d at 447, in our most
recent discussion we distilled general principles to guide us:
The crucial question is whether the entities alleged to have
conspired maintain an “economic unity,” and whether the
entities were either actual or potential competitors.
Freeman
,
In fact, as the district court concluded, the objectives of the
JRTCA and its regional affiliates are “common, not dispa-
rate.”
See Copperweld
, 467 U.S. at 771. Both the national
club and its affiliates have a common goal—the best interests
of the Jack Russell Terrier—and both the JRTCA and its
regional affiliates hope to protect their identical economic
interest—the current and future value of the Jack Russell Ter-
rier breed, as determined by the JRTCA-breed standards.
See
As a preliminary matter, Appellants argue that the “single entity”
determination is an affirmative defense that must be plead and proven by
the JRTCA and is therefore improperly resolved on a motion to dismiss.
To the contrary, as covered above, the existence of more than one entity
sufficient to conspire is part of the first element required to allege a § 1
violation.
See, e.g.
,
Amer. Ad. Mgmt. Inc.
,
the JRTCA and its regional affiliates were actual or even
potential competitors, or conspired through the COR to gain
some competitive advantage.
See Freeman
,
Because this case concerns a national dog club, it does not fit neatly
into the mold of most antitrust cases analyzing for-profit corporations,
Appellants erroneously rely on
Los Angeles Memorial Coli-
seum Commission v. National Football League
, in which we
held that the N.F.L. and its teams were not a single entity for
Sherman Act purposes.
the conclusion that the regional JRTCA affiliates acted as
independent, self-sufficient agents that could have conspired
with the national club. The Appellants have articulated a
claim that only involves activity occurring within a single
enterprise. As we have said, such a claim falls within the
sphere of
Copperweld
preclusion and accordingly is not a via-
ble antitrust claim. We hold that the Appellants did not allege
sufficient facts to support a claim that the JRTCA and its
their officers, and/or their subsidiaries. The JRTCA does not own its
regional affiliates, nor is there an agreement between them to divide prof-
its and losses. However this lack of a traditional corporate structure is less
persuasive in the non-profit context, and the difference alone is insuffi-
cient to require reversal.
Copperweld
, 467 U.S. at 773 n. 21 (instructing
that the question of whether entities have the capability to conspire is
determined by the substance of a relationship, not its form);
Thomsen v.
W. Elec. Co., Inc.
,
clarifying discussion in Copperweld .
affiliates pursued divergent economic goals, and we affirm the district court’s Rule 12(b)(6) dismissal. [17]
III
We next address the Appellants’ Lanham Act claim.
[18]
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),
prohibits the use of false designations of origin, false descrip-
tions, and false representations in the advertizing and sale of
goods and services.
Smith v. Montoro
,
Appellants admit that the JRTNNC is not a direct competi- tor with the JRTCA, but point out that standing of non- competitors has been recognized in other Lanham Act cases, Our precedent requires us to recognize that our holding is limited to the particular circumstances we address. Williams , 999 F.2d at 447 (“Whether corporate entities are sufficiently independent requires an examination of the particular facts of each case.”). We express no opinion on whether other national clubs and their regional or local affiliates could be considered a “single entity” for Sherman Act purposes in other factual and competitive settings. After a bench trial, we review the district court’s findings of fact for
clear error, and we review the court’s conclusions of law de novo.
Lentini
v. California Ctr. for the Arts, Escondido
, 370 F.3d 837, 843 (9th Cir.
2004). We review questions of standing and statutory construction de
novo.
Barrus v. Sylvania
,
[9]
Appellants’ reliance on
Waits
and
Smith
is misplaced.
We have said that different causes of action alleged pursuant
to the different subsections of 15 U.S.C. § 1125(a) have dif-
ferent standing requirements.
Barrus
, 55 F.3d at 469-70.
Smith
and
Waits
involved the “false association” prong of
§ 43 of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A), under
which a plaintiff need only allege commercial injury based
upon the deceptive use of a trademark or its equivalent to sat-
isfy standing requirements.
Id
. That the parties be competitors
“in the traditional sense” is not required.
Waits
, 978 F.2d at
1110. On the other hand, for standing pursuant to the “false
advertising” prong of § 43(a) of the Lanham Act, 15 U.S.C.
§ 1125(a)(1)(B), a plaintiff must show: (1) a commercial
injury based upon a misrepresentation about a product; and
(2) that the injury is “competitive,” or harmful to the plain-
tiff’s ability to compete with the defendant.
Barrus
, 55 F.3d
at 470 (citing
Halicki v. United Artists Communications, Inc.
,
violation of § 1125(a)(1)(B). The JRTNNC is not a competi- tor of the JRTCA that has suffered a competitive injury. Nor does the fact that Sprague and Fisher were the target of the True Grit advertisement make them competitors with the JRTCA that have suffered competitive injuries. We hold the Appellants contend that the AKC would have had standing as a com- petitor of the JRTCA, and lament that, while the Appellants tried to join the AKC in this litigation, the AKC chose not to remain. However, the dis- missal of the AKC as a party was not appealed and is not before us. district court did not err in concluding the Appellants lacked standing under the Lanham Act. [20]
IV
Lastly, we address the JRTCA’s cross-appeal of the district court’s denial of costs. [21] Federal Rule of Civil Procedure 54(d)(1) [22] creates a
presumption in favor of awarding a prevailing party its costs
other than attorneys’ fees, but vests in the district court the
discretion to refuse to award such costs if the district court
gives specific reasons explaining why the case is not ordinary
and why it would be “inappropriate or inequitable to award
costs.”
The Ass’n of Mexican-Am. Educators v. California
,
[20] The parties also debate whether the COR is protected by the First Amendment. We need not and do not reach this question because the ini- tial issue of standing (or lack thereof) to assert a “false advertising” Lan- ham Act claim resolves the matter. We review a district court’s denial of costs to a prevailing party for
an abuse of discretion.
Berkla v. Corel Corp.
,
The district court gave specific reasons why an award of costs was inappropriate, noting both the Appellants’ lack of financial resources and the substantial profit of the JRTCA. Those reasons have previously been approved by this court as proper grounds for a denial of costs. See Ass’n of Mexican- Am. Educators , 231 F.3d at 592-93. The denial of costs was not an abuse of discretion.
AFFIRMED.