Sureshot Golf Ventures, Inc. v. Topgolf International, Inc.
MEMORANDUM OPINION AND ORDER GRANTING 10 MOTION to Dismiss Pursuant to Rule 12(B)(1) and 12(B)(6) AND Brief in Support.(Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)
United States District Court
Southern District of Texas
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
SURESHOT GOLF VENTURES, INC.,
TOPGOLF INTERNATIONAL, INC.,
August 24, 2017
David J. Bradley, Clerk
CIVIL ACTION H-17-127
MEMORANDUM OPINION & ORDER
Pending before the court is defendant Topgolf International, Inc.’s (“Topgolf”) motion to
dismiss. Dkt. 10. Having reviewed the motion, response, reply, and the applicable law, the court
is of the opinion that Topgolf’s motion to dismiss (Dkt. 10) should be GRANTED.
This is an antitrust case between plaintiff SureShot Golf Ventures, Inc. (“SureShot”) and
defendant Topgolf. Topgolf was established in 2000 with multiple locations in the United States and
the United Kingdom as a “golf entertainment center”1 which offers point-scoring golf games as well
as food and beverages. Dkt. 1. Customers hit golf balls toward a series of holes and are scored
based on distance and accuracy. Id. SureShot was established at or around 2014 with the intent to
compete with Topgolf’s golf entertainment centers. Id. at 5.
At issue is the technology used to track the location of each golf ball. Topgolf developed its
own proprietary technology to track the location of the golf balls. Dkt. 1. SureShot has licensed the
SureShot uses the terms “golf entertainment centers,” “golf entertainment facilities,” and
“golf entertainment venues” interchangeably throughout its complaint. See e.g., Dkt. 1 at 1, 2, 5, 8,
12, 13. For purposes of this order, the court will use the term “golf entertainment centers.”
use of the ball-tracking technology, the Protracer Range System, produced by the Swedish company
Protracer. Dkt. 1. SureShot alleges that the Protracer model is “superior” to Topgolf’s because the
Protracer’s software tracks the balls in flight, adds graphics to make the ball visible in near real time
on a television monitor, and thus creates a three-dimensional gaming experience. Id.
SureShot contends that Protracer’s proprietary hardware, technology, and licensed software is
integral to SureShot’s business model. Id.
On April 17, 2015, SureShot entered into a five-year licencing agreement with Protracer,
that lasts from 2015 to 2020 (the “Frame Agreement”). The Frame Agreement required Protracer
to install Protracer Range Systems in up to 500 SureShot bays and five SureShot facilities each year
and provide support and maintenance. Id. SureShot also alleges that Protracer stated that it would
not enter into any exclusive contracts with a licensee. Id.
On May 24, 2016, Topgolf acquired Protracer and the Protracer Range System. Dkt. 1.
According to Topgolf, SureShot continues to use the Protracer technology and it has not been
deprived of any access. Dkt. 10. SureShot, however, argues that Topgolf’s acquisition of Protracer
means that Topgolf controls the very technology that SureShot built its business model upon, and
thereby “den[ies] SureShot access to long-term, continued licencing of Protracer technology and
purchasing of Protracer equipment.” Dkt. 1 at 12. SureShot argues that TopGolf intends to foreclose
market competition. Dkt. 1 at 10. SureShot cites TopGolf’s refusal to give SureShot assurances that
Protracer would continue to be available after the expiration of the five-year Frame Agreement as
evidence. Dkt. 1 at 10. SureShot alleges that an executive from Topgolf said to SureShot that,
“If I was in your position, I would look for alternatives.” Id.
On January 17, 2017, SureShot filed a complaint against Topgolf alleging four federal
antitrust claims: (1) conspiracy under Section 1 of the Sherman Act, (2) monopolization and (3)
attempt to monopolize under Section 2 of the Sherman Act (15 U.S.C. § 1, 2), and (4) unlawful
acquisition under section 7 of the Clayton Act (15 U.S.C. § 18). Dkt. 1. On April 13, 2017, Topgolf
filed a motion to dismiss. Dkt. 10. SureShot responded and Topgolf replied. Dkts. 14, 16.
II. LEGAL STANDARDS
Motion to Dismiss for Lack of Jurisdiction
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges a federal
court’s subject matter jurisdiction. Federal courts have limited jurisdiction; without jurisdiction
conferred by statute, they lack the power to adjudicate claims. See Stockman v. Fed. Election
Comm’n, 138 F.3d 144, 151 (5th Cir. 1998). Under Rule 12(b)(1), a claim is properly dismissed for
lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to
adjudicate the claim. Home Builders Ass’n, Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir.
Motion to Dismiss for Failure to State a Claim
“Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement of the
claim showing that the pleader is entitled to relief.’” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
127 S. Ct. 1955 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99 (1957)).
In considering a Rule 12(b)(6) motion to dismiss a complaint, courts generally must accept the
factual allegations contained in the complaint as true. Kaiser Aluminum & Chem. Sales, Inc. v.
Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). The court does not look beyond the
face of the pleadings in determining whether the plaintiff has stated a claim under Rule 12(b)(6).
Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999).
“[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations, [but] a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’
requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do.” Twombly, 550 U.S. at 555 (citations omitted). The “[f]actual allegations must
be enough to raise a right to relief above the speculative level.” Id. The supporting facts must be
plausible—enough to raise a reasonable expectation that discovery will reveal further supporting
evidence. Id. at 556. When considering a motion to dismiss for failure to state a claim, “a district
court must limit itself to the contents of the pleadings, including attachments thereto.” Collins v.
Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000).
Sherman Act, § 1
Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust
or otherwise, or conspiracy, in restraint of trade or commerce among the several States.”
15 U.S.C. § 1. While section 1 could be interpreted to proscribe all contracts, see, e.g., Board of
Trade of Chicago v. United States, 246 U.S. 231, 238 (1918), it is never “taken [as] a literal approach
to [its] language.” Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006). Rather, section 1 “outlaw[s] only
unreasonable restraints [on trade].” State Oil Co. v. Khan, 522 U.S. 3, 10 (1997).
Sherman Act, § 2
Section 2 of the Sherman Act makes it unlawful for an entity to “monopolize.” 15 U.S.C.
§ 2. Monopoly power is “the power to control price or exclude competition.” United States v. E.I.
du Pont de Nemours & Co., 351 U.S. 377, 391, 76 S. Ct. 994 (1956). To prove monopolization,
a plaintiff must show: “(1) the possession of monopoly power in the relevant market and (2) the
willful acquisition or maintenance of that power as distinguished from growth or development as a
consequence of a superior product, business acumen, or historic accident.” United States v. Grinnell
Corp., 384 U.S. 563, 570–71, 86 S. Ct. 1698 (1966). A prerequisite of an attempted monopolization
or monopolization claim is proof of the relevant market. C.E. Servs., Inc. v. Control Data Corp.,
759 F.2d 1241, 1244 (5th Cir. 1985).
Clayton Act, § 7
Section 7 of the Clayton Act forbids mergers in any line of commerce where the effect may
be “substantially to lessen competition or tend to create a monopoly.” 15 U.S.C. § 18; United States
v. Falstaff Brewing Corp., 410 U.S. 526, 531, 93 S. Ct. 1096 (1973). But proof of a “mere
possibility of a prohibited restraint or tendency to monopol[ize] will not establish the statutory
requirement. . . .” du Pont, 353 U.S. at 598.
SureShot raises four claims under the Sherman Act and the Clayton Act, for conspiracy,
attempt to monopolize, monopolization, and unlawful acquisition. 15 U.S.C. §§ 1, 2, 18.
Specifically, SureShot alleges that (1) TopGolf acquired the very technology that is essential to
SureShot’s operations, (2) TopGolf refused to provide SureShot assurances that the Protracer
technology will be continuously available after its five-year licencing agreement expires, and (3) any
support and maintenance requests placed through Protracer would expose confidential information
or SureShot’s plans to open a new facility.
Topgolf moves to dismiss the claims because (1) SureShot’s claims are not ripe, (2) SureShot
failed to plead anticompetitive or exclusionary conduct in its complaint, and (3) SureShot failed to
plead a relevant market. Dkt. 10. As a threshold matter, the court will first address whether
SureShot’s claim is ripe, to confer standing. Lujan v. Def. of Wildlife, 504 U.S. 555, 560–61, 112
S. Ct. 2130 (1992).
Article III Standing
Standing requires plaintiffs “to demonstrate: they have suffered an ‘injury in fact;’ the injury
is ‘fairly traceable’ to the defendant’s actions; and the injury will ‘likely . . . be redressed by a
favorable decision.” Public Citizen, Inc. v. Bomer, 274 F.3d 212, 217 (5th Cir. 2001) (quoting
Lujan, 504 U.S. at 560–61). “An injury in fact [is] an invasion of a legally protected interest which
is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.”
Lujan, 504 U.S. at 560. Standing is jurisdictional in nature and should be decided by the court
before reaching the merits of the case. See Steel Co. v. Citizens for Better Env’t, 523 U.S. 83, 93–94,
118 S. Ct. 103 (1998).
Topgolf moves to dismiss SureShot’s claims, arguing that none of the claims is ripe for
judicial determination because SureShot complains of an anticipated denial of access or future
breach of contract. Dkt. 10 at 14; Dkt. 14 at 5. Topgolf argues that SureShot has not suffered any
harm because Topgolf has continued to honor the terms of the licensing agreement between Protracer
and SureShot. Dkt. 10 at 8. Topgolf argues that SureShot’s legal theory is based solely on a
prediction that someday Topgolf will decline to renew the existing service contract and thereby
eliminate SureShot’s continued access to the Protracer Range System. Id.
SureShot argues that it is harmed by Topgolf’s acquisition of Protracer because (1) all of
SureShot’s support and maintenance requests must go through Protracer, at which point Topgolf
would control the timing, quality, and efficiency of the repairs and replacement parts; (2) Protracer,
and thereby Topgolf, would have access to “sensitive, proprietary, and non-public confidential
information” that would harm SureShot’s competitive advantage; and (3) when SureShot places an
order with Protracer for a new installation, Topgolf will have knowledge of SureShot’s plans to open
a new facility. Dkt. 1 at 8–10. SureShot also argues that Topgolf has deprived SureShot of a
competitive opportunity to enter the market and alleges that Topgolf “will have complete control
over [Protracer], including the ability to license it only to those markets or industries that do not
occupy the entertainment golf facility space.” Dkt. 1 at 11 (emphasis added).
Topgolf contends that this situation is an option contract, where “challenges to an option are
not ripe for resolution before the option is exercised.” Dkt. 10 at 13 (citing Destec Energy, Inc. v.
S. Cal. Gas Co., 5 F. Supp. 2d 433, 461–62 (S.D. Tex. 1997) (Rosenthal, J.)). Topgolf argues that
it simply possesses an option not to renew SureShot’s license of the Protracer Range System at the
end of the five-year contract, and that SureShot is prematurely suing under the fear that Topgolf will
decline to renew or extend the existing contract “when and if it occurs” in the future. Dkt. 10 at 6
(citing Middle South Energy, Inc. v. City of New Orleans, 800 F.2d 488 at 489–90 (5th Cir. 1986)).
The court agrees with Topgolf that SureShot has failed to plead that Topgolf has denied it
access to the Protracer Range System. See Dkt. 14 (Pl. Resp.) at 3 (alleging Topgolf is “[f]orcing
its competitor SureShot to incur considerable sums to become a significant competition only to later
pull the plug on the license in 5 years . . . .”) (emphasis added). The Fifth Circuit has held that
challenges to an option are not ripe for resolution before the option is exercised. See Middle South
Energy, 800 F.2d at 490. Further, the court is unpersuaded that the lack of assurances and the
statement to look for alternatives that was allegedly made by an unidentified Topgolf executive is
equivalent to a denial of access. See Dkt. 1 at 10. SureShot has not pled that Topgolf has denied it
access to the Protracer technology.
At this point, the court finds that SureShot’s perceived threats of monopolistic behavior are
speculative and do not confer standing. Phototron Corp. v. Eastman Kodak Co., 842 F.2d 95, 100
(5th Cir. 1988) (holding that the plaintiff must show antitrust injury and that the threat of defendant’s
monopolistic behavior is not enough to create standing). The court observes that none of the
antitrust actions which SureShot alleges has actually occurred (i.e. controlling prices, foreclosing
competitors from access to technology, sending less qualified personnel for installation and service
requests, licensing the technology only to companies outside of golf entertainment centers).
“Under Cargill, a competitor of two merging entities has standing to challenge the merger if an
allegation and proof of predatory pricing is made.” Id. (citing Cargill, 479 U.S. at 109); see Dkt. 1.
Further, in Red Lion Med. Safety, Inc. v. Gen. Elec. Co., a district court denied a motion to dismiss
only after the plaintiff had successfully pled that after the defendant entered into an exclusive
distributor agreement, other companies were charged a 20% premium on the purchase price of parts
and experienced delayed shipments. No. 2-15-CV-307, 2016 WL 3770958, at *1 (E.D. Tex. Mar.
31, 2016). Unlike in Red Lion, SureShot’s allegations that Topgolf may prolong the wait time or
provide lower quality work on SureShot’s requests for maintenance and repair have not yet occurred.
Further, the court finds that SureShot not only lacks Article III standing, but also antitrust
standing. “A plaintiff has standing to pursue an antitrust suit only if he shows: ‘1) injury-in-fact, an
injury to the plaintiff proximately caused by the defendants’ conduct; 2) antitrust injury; and 3)
proper plaintiff status, which assures that other parties are not better situated to bring suit.’”
Waggoner v. Denbury Onshore, L.L.C., 612 Fed. App’x. 734, 736 (5th Cir. 2015) (citing Doctor’s
Hosp. of Jefferson, Inc. v. Se. Med. Alliance, Inc., 123 F.3d 301, 305 (5th Cir. 1997).
The burden is on the plaintiff to prove that “it has or will suffer antitrust injury.” Anago, Inc.
v. Tecnol Med. Prods., Inc., 976 F.2d 248, 249 (5th Cir. 1992). The Supreme Court has defined
antitrust injury as an injury “of the type the antitrust laws were intended to prevent and that flows
from that which makes defendants’ acts unlawful.” Id. (quoting Cargill, Inc. v. Monfort of Colo.,
Inc., 479 U.S. 104, 109, 107 S. Ct. 484 (1986)). The Fifth Circuit has “narrowly interpreted the
meaning of antitrust injury [to include increased prices and decreased output, and] excluding from
it the threat of decreased competition.” Anago, 976 F.2d at 249; FUNimation Entm’t v. A.D. Vision,
Inc., 4:12-CV-1736, 2013 WL 2189881, at *5 (S.D. Tex. May 20, 2013) (Ellison, J.) (identifying
antitrust injury as “some form of predatory pricing or illegal tying . . . when the rival has engaged
in something more than vigorous price, produce, or service competition”). The antitrust laws were
enacted for “the protection of competition not competitors.” Brown Shoe Co. v. United States, 370
U.S. 294, 320, 82 S. Ct. 1502 (1962). “To have antitrust standing, a party must do more than meet
the basic case or controversy requirement that would satisfy constitutional standing.” FUNimation
Entm’t, 2013 WL 2189881, at *5..
SureShot failed to plead that Topgolf’s actions harmed competition overall, and not just
SureShot’s competitive advantage. SureShot argues that it has experienced antitrust injury because
“long-term, continued licensing of Protracer technology and purchasing of Protracer equipment”
is foreclosed and that SureShot does not have the financial means to develop its own technology or
work with another supplier. Dkt. 1 at 12–13.
The Supreme Court has held that a plaintiff lacks antitrust standing if the same injury-in-fact
would have occurred had a company of another size purchased the competing business. Brunswick
Corp. v. Pueblo Bowl–O–Mat, Inc., 429 U.S. 477, 487, 97 S. Ct. 690 (1977) (holding plaintiff’s
injury of loss of income bore no relationship to the size of the defendant’s company because a
smaller company acquiring the competing business would harm the plaintiff just the same);
Jebaco, Inc. v. Harrah’s Operating Co., Inc., 587 F.3d 314, 321 (5th Cir. 2009) (finding horizontal
restraint of trade did not arise when plaintiff would have suffered the same harm whether defendant
retained its assets or sold them to another party); Anago, 976 F.2d at 251 (holding plaintiff did not
show that higher prices and decreased competition will cause plaintiff injury and that plaintiff “will
suffer a loss of independence whether or not [the] takeover violates antitrust principles”).
The court finds that SureShot failed to plead that Topgolf’s acquisition of Protracer would
substantially lessen competition or tend to create a monopoly in the market overall. A federal court
may not take jurisdiction over a matter unless it presents an actual controversy. Md. Cas. Co. v.
Pacific Coal & Oil Co., 312 U.S. 270, 272–74, 61 S. Ct. 510 (1941). At this time, the court finds
that SureShot has not presented any plausible factual allegations that Topgolf is foreclosing
competition through its acquisition of Protracer. Because SureShot has not pled that Topgolf has
denied or refused access to the Protracer Range System, SureShot’s claims are not ripe for judicial
determination. Accordingly, Topgolf’s motion to dismiss is GRANTED.
Topgolf’s motion to dismiss (Dkt. 10) is GRANTED.
Signed at Houston, Texas on August 24, 2017.
Gray H. Miller
United States District Judge
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