Supreme Court Sends San Diego Exclusives Case Back to Trial Judge

HIL ANDERSON, SENIOR EDITOR
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Washington, DC – The closely watched legal battle over a controversial exclusive service policy at the San Diego Convention Center was sent back to a federal judge this week when the U.S. Supreme Court decided not to get involved.

The high court on January 12 denied a petition from United National Maintenance (UNM) seeking a review of an August 15 ruling from the 9th Circuit Court of Appeals that shielded the San Diego Convention Center Corporation (SDCCC) from antitrust charges. The case now goes back to federal court in San Diego for a new trial on UNM’s claim of contract interference which was ordered by the Ninth Circuit Court of Appeals. The first meeting with U.S. District Judge Anthony Battaglia was scheduled for March 13.

The rebuff from Washington marked another twist in a case that has had show organizers and service contractors concerned about the ability of convention centers to essentially bar outside companies from working in their buildings regardless of valid, pre-existing contracts and pricing concerns. “Unfortunately, this ruling could open the door for public facilities to create virtual monopolies on services as they see fit, regardless of the show managers’ pre-signed arrangements or budgets,” said Richard Simon, president & CEO of United Service Companies. [Trade Show Executive and UNM are both subsidiaries of Chicago-based United Service Companies.]

The SDCCC contends it has the legal right to implement exclusive services, because it believes exclusives do not constitute a monopoly and because the SDCCC is essentially a city agency that is exempt from antitrust laws. However, numerous show organizers and industry associations have spoken out against exclusives, and say show organizers should have the freedom of choice to designate their service providers. In 2010, prominent show organizers and industry associations sent letters to the SDCCC officials, asking them to reconsider the policy. The Society of Independent Show Organizers (SISO) released a statement, calling exclusive services “anti-competitive” in a TSE article in August 2010. The International Association of Exhibitions and Events (IAEE) and the Exhibition Services and Contractors Association (ESCA) also issued statements. Read more from TSE’s archives: http://65.36.240.184/archive/industry-news/siso-calls-service-exclusives-anticompetitive/

Simon said, “SDCCC contends they do not have a monopoly, but we respectfully disagree since the SDCCC sets the pricing and has only one service provider, the very definition of a monopoly.”  Simon also pointed out, “The Supreme Court did not rule in SDCC’s favor; they simply did not schedule the time to review the case, given the high volume of cases before them.”

At issue specifically in March will be damages sought by UNM after the SDCCC instituted a policy requiring outside cleaning companies, already under contract to general service contractors, to use SDCCC’s in-house workers at inflated rates. A federal court jury in 2011 had found that the SDCCC had violated UNM’s contract for cleaning services by declaring in 2006 that UNM would not be allowed to bring in its own workers to do the cleaning during trade shows. Instead, UNM would have to pay SDCCC to perform their work at rates that were higher in cost than what United was charging current customers.

United countered by suing in 2007 on the grounds the SDCCC was improperly interfering with UNM’s contracts with the general service contractors and trade show organizers. The company also accused the SDCCC of antitrust violations, alleging the SDCCC wanted a monopoly on cleaning services at the center strictly to collect the revenues. The SDCCC steadfastly asserted that the requirement to use an in-house contractor was strictly a Homeland security issue, but during the trial, later added that it was about revenues as well.

In a written statement, Carol Wallace, president & CEO of the San Diego Convention Center Corporation, told Trade Show Executive, “We are thrilled with this decision and our victory in the antitrust elements of this case. This is a positive outcome for the facility management industry, allowing venues to retain control over their buildings’ operations.”  Wallace further added, “We anticipate an affirmative outcome on the remaining claim as well.”

In fact, the jury did not reach a verdict on the antitrust allegation, but when polled, the jury voted 7 to 1 in favor of United in the antitrust claims against SDCCC, Simon said.  UNM was awarded $668,905 in damages for contract interference. But in a surprise twist, the trial judge agreed with the SDCCC’s motion to nullify the jury verdict on the grounds their decision was not supported by the law.

The 9th Circuit ruling in August, reversed the reversal, but did not reinstate the damages due to a technical issue in the jury instructions.

The SDCCC said in a statement that the ruling settled UNM’s antitrust claims, meaning the SDCCC was protected from potential treble damages, punitive damages or attorney’s fees. The only remaining issue, the statement said, would be compensatory damages for intentional interference with UNM’s contracts.

Reach Richard Simon at (312) 922-8558 or rsimon@unitedhq.com; Carol Wallace at (619) 525-5000 or carol.wallace@visitsandiego.com