IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS

BEAUMONT DIVISION

GAMES PEOPLE PLAY, INC., Plaintiff, v. Civil Action No. 1:14-cv-00321 NIKE, INC., Defendant.

PLAINTIFFS FIRST AMENDED COMPLAINT

Games People Play, Inc. (GPP) files this, its First Amended Complaint complaining of

Nike, USA Inc. (Nike)1 as follows:

I. SUMMARY OF THE CASE

1. GPP is a Beaumont-based, family owned golf supercenter, including a retail

component, a 40 acre practice area, and a teaching center. It started on leased premises in 1984

as a driving range with a 600 square foot portable building. It has grown to become a nationally

renowned golf retail center with a global online sales operation.

2. Nike is among the worlds leading golf product manufacturers and distributors.

GPP has for many years been southeast Texas and southwest Louisianas leading retailer of Nike

golf products.

3. In order to continue ordering products from Nike on credit (as is customary in the

industry), GPP was required to enter into a credit agreement with Nike (the Agreement). Exhibit

A. The Agreement provides that Oregon law governs not only disputes arising out of the

1 Nike was named in Plaintiffs Original Petition as Nike, Inc. instead of Nike USA, Inc. This was a misnomer which Plaintiff corrects by this pleading. Rule 15(c)(1)(C).

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Agreement which is not the case here but the relationship between Nike and GPP. Because

this dispute arises out of the relationship between the parties, Oregon law applies.

4. Beginning around 2010, Nike became unhappy with GPPs prices and its (Nikes)

resulting loss of control over the golf supply market. In order to regain that control, Nike began

imposing unreasonable restrictions on GPP, treating GPP inequitably, favoring other retailers by

providing lower prices and permitting conduct such as Internet sales forbidden to GPP. When

GPP complained, Nike retaliated by cutting off its supply entirely, costing GPP millions of

dollars.

5. GPP files this action under federal and state antitrust laws, specifically Section 2(a)

of the Robinson-Patman Act and Oregons Anti-Price Discrimination Act, which prohibit the sale

of goods of like grade and quality to different purchasers at different prices and discriminatory

promotional practices. GPP additionally sues for Nikes breach of its fiduciary duty to GPP, bad

faith and unfair dealing, intentional interference with economic relations, and negligent

misrepresentation, all violations of Oregon law.

II. JURISDICTION AND VENUE

6. This Court has jurisdiction over the claims in this action pursuant to 28 U.S.C.

1331, 1332 and 1337. Venue in this district is proper under 28 U.S.C. 1391, because Defendant

transacts business within this district, is subject to this Courts personal jurisdiction, and a

substantial part of the events giving rise to Plaintiffs claims occurred within this district.

III. Parties

7. GPP is a Texas corporation with its principal place of business in Beaumont,

Jefferson County, Texas.

8. Defendant Nike is an Oregon corporation with its principal place of business at One

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Bowerman Drive, Beaverton, Oregon 97005.

IV. FACTS

9. Jeff and Marilyn Williams bought GPP in 1984. Their Beaumont business was

comprised of driving range sales, batting cage sales, and some golf retail sales. Their total retail

inventory was less than $35,000 at that time and they didnt have experience in the retail industry.

While Jeff Williams loved golf, he didnt have any specialized knowledge of the golf business.

10. After they had been in business a couple of years, Jeff Williams read an article

about a family in Oregon that seemed to have a similar business model but was far more

successful. He reached out to the family to see if they would be willing to share their experience.

They were, and invited Jeff to come to Oregon. There he learned that the secret to the familys

success was not all that secretive: providing excellent service and consistently offering the lowest

prices when possible. It was a cold, rainy January day when Jeff made his visit to Oregon but

they still rang up almost $20,000 in sales. At that time, a good sales day at GPP would have been

$500 to $1,000. When Jeff returned to Beaumont, he decided to add very low, competitive pricing

to the great service they were already offering. Sales increased and the business started growing.

11. GPP faced challenges over the years from franchise stores and other independents

but those all came and went while GPP continued to grow and prosper. In 1996, GPP was able to

buy the 40 acre premises they had been leasing. In 1999, they built their dream store about 50

yards from their old location, which they tore down. Then in 2000, GPP won the most coveted

award in the golf retail industry: they were selected as one of the Top 100 Golf Shops in America

by Golf World Magazine. They would go on to win the award a number of times.

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12. Nike entered the golf industry in 1986 and shortly thereafter, GPP started selling

Nike golf shoes and continued to be an active Nike account. Until the early 2000s, GPP had been

solely a brick and mortar operation but decided to go online. This decision was made, in part, at

the urging of GPPs Nike field representative, who routinely encouraged expansion into Internet

sales. It also coincided with Jeff and Marilyn Williams son, Austin, joining the business. Austin

had been a college golfer and graduated with a degree in finance. He proved to be the perfect

person to grow GPPs e-commerce division and he soon became vice president in charge of

purchasing.

13. GPP expanded its retail presence globally through a variety of e-commerce

platforms that included its own website, gppgolf.com, eBay stores, and Amazon.com. It invested

hundreds of thousands of dollars in its e-commerce operation and became the largest independent

golf account Nike had in southeast Texas and southwest Louisiana, buying well over a million

dollars a year in Nike products. As the relationship developed between GPP and Nike, there were

ups and downs. GPP believed at times they were treated differently by Nike than their

competitors and would make their complaints known. The situation reached a boiling point in

2010.

14. Since 1996, when Nike entered the hard goods ball and club segment of golf

retail, it had not had a great deal of success with clubs. To turn that around, the company invested

heavily in its Victory Red (VR) Iron, which was reported to have been designed and played by

Tiger Woods, one of Nikes sponsored athletes. In the 2009 2010 time frame, the VR Iron was

initially very popular and in demand. There were two different types, one a full cavity and the

other a split cavity. GPP sold both types.2

2 Though GPP would dispute any claim of confidentiality, in an abundance of caution, GPP does not include Nikes wholesale prices here.

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15. On May 17, 2010, Austin Williams received an email from Kevin Goode of Nitro

Golf, an equipment reseller, offering to sell him the VR full and split cavity models, the identical

clubs, for significantly lower than the prices offered by Nike to GPP, which GPP had been paying.

The full email string revealed that the opportunity originated with a GPP competitor named Hap

Personet, an individual who, based on information and belief, owns companies that sell golf

equipment online, the same as GPP. Nike sold Personet the identical VR Irons for significantly

less than what GPP had been paying Nike.

16. GPP requested that Nike sell it the clubs for the same price it was offering Personet

but was told that as of right now, we do not have any program we can offer on any of the VR

Irons. GPP purchased the clubs from Hap Personet for less than it would have paid Nike. Jeff

Williams told Nikes regional sales manager, Carey Guglielmo, that GPP had purchased the VR

Irons at a discounted price. Guglielmo said GPP could sell the clubs at whatever price it wanted

and did not have to follow Nikes pricing policies regarding the clubs. Jeff Williams offered to

produce serial numbers from the clubs so Nike could trace their origin but Guglielmo said that

would not be necessary.

17. On June 21, 2010, Jeff Williams sent a detailed letter to Carey Guglielmo

recounting their earlier conversation and setting out his complaints about inequitable pricing and

the gray market Nike was apparently utilizing to sell its clubs, all while harming retailers such

as GPP. Just eight days later, on June 29, 2010, Nike was suddenly able to offer GPP a much

lower price for VR Irons. When a price is suddenly lowered in this way, manufacturers usually

offer what is known as a net down allowance 3

3 Net down is a term used to describe a manufacturer-imposed price reduction. Since the supplier has instituted the price drop, the retailer expects to be compensated for the gross profit loss on future sales at the reduced price. The allowance the supplier provides the retailer is therefore called a net down allowance.

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18. In the wake of the new lower price, GPP went back to Hap Personet to ask if he

would share some of his net down allowance in order to help make GPP whole. Personet

responded as follows:

I was offered a deal to help my rep out in which this deal was the only deal like it on the table in mid-May, period!...I do know this as a fact, they used all of their promotional money in the region to get me the prices that allowed me to offer the extremely low prices at the time, which means that this deal was completely finalized in their mind, my mind, and all of my other customers [sic] minds when I shipped the goods. This deal came out of their promotional budget, so I am not sure how they will look upon me asking for a credit, because I do not want to ask them for anything more as I feel they were very generous in their offer.

Each Nike regional representative is provided an advertising/promotional budget which is

referred to as the Manufacturer Development Fund or MDF. The Robinson-Patman

Act requires sellers to provide allowances and services promoting resale, such as the

MDF, on a proportionally equivalent basis to all competing customers. That was not done

here.

19. On July 5, 2010, Guglielmo informed GPP that he was going on a 30 day

sabbatical beginning that very day. When he returned in August 2010, he made a site

visit to GPP during which Jeff Williams shared numerous written complaints and

questions, many of them about what had transpired regarding the VR Irons. Guglielmo

refused to discuss almost all of the complaints but did say what happened regarding the

VR Irons was not that out of the ordinary.

20. On September 24, 2010, Jeff Williams sent Nike Golf General Manager

Mike Francis a letter regarding the VR Irons incident and other Nike policy violations.

Following Franciss receipt of the letter, there were follow up calls and emails between

Jeff Williams and Francis. Francis stated that regarding the future of these types of deals

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(the VR Irons incident), you can rest assured this is not how we want our business done

and I will personally involve myself if you are approached with these offers in the future.

21. On October 12, 2010, Francis and five other Nike representatives flew to

Beaumont to visit GPP and Jeff Williams. The letter Williams sent on September 24,

2010 served as the meetings agenda. No answers regarding the VR Irons incident were

provided. Instead, Nike simply assured GPP that nothing like it would happen again.

Francis asked Jeff Williams to give him a year to clean up problems at Nike Golf and get

new policies in place. Jeff agreed but was very concerned that because he had gone to the

highest level at Nike Golf, there would be retribution from Guglielmo, the regional

manager. Both Francis and Guglielmo assured Jeff Williams nothing like that would

occur.

22. After the October 12, 2010 meeting, communication between GPP and

Guglielmo slowed, then stopped almost entirely. Guglielmo quit making site visits to

GPP. He refused to answer business questions sent to him by GPP and delegated GPP to

other representatives in the Nike organization. He greatly reduced the promotional offers

made to GPP, made little or no effort to help increase Nike business for GPP, and never

attended demo days at GPP. Prior to the October 2010 meeting, Nike had routinely made

promotional offers and discounts available to GPP. For instance, in 2009, Nike had given

GPP rebates totaling more than $50,000 and had offered an average discount of

approximately 17.5 percent on various products. Nike representatives also routinely took

part in demo days prior to the October 2010 meeting.

23. Nikes harmful, inequitable treatment did not cease. Beginning in 2010

and continuing throughout the relationship between Nike and GPP, Nike would arbitrarily

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and inequitably enforce its policy regarding minimum advertised price or MAP. Nike

would accuse GPP of violating its MAP policy and insist that prices be raised. When GPP

would discover that competitors were not being required to do the same and would

complain to Nike, the competitors were not forced to raise their prices accordingly. Or,

in other instances, GPP would discover competitors advertising Nike products for a price

below MAP, seek guidance from Nike as to whether they could do the same and then,

receiving no response, go ahead and lower their price. GPP would then be directed by

Nike to advertise a higher price.

24. In March 2011, GPP learned that Nike was selling its two types of Red

Swoosh Balls for $15.50 and $16.50 per dozen. GPP reached out to its field

representative, Jeff Morici, and told him they wanted dozens of both types at those prices.

Morici initially said he wasnt aware of such an offer but then said he had contacted

Guglielmo and while there was such an offer being made to some retailers, Guglielmo

told Morici he didnt want the Red Swoosh Ball sold to retailers with an Internet presence.

GPP assured Nike that it was willing to sell the balls only through their brick and mortar

stores and not via the Internet but Nike continued to refuse to sell them the balls. Then,

on March 4, 2011, Morici informed GPP that Red Swoosh Balls would now be sold via

Internet accounts but that Guglielmo had said the opportunity would not be made available

to GPP. GPP was required to purchase Red Swoosh Balls from a different supplier at a

higher price.

25. On May 3, 2011, GPP learned that Nike was offering its Vapor One in a

cubed package to retailers and that each regional manager had been allocated 5000 dozen

at a price of $10.00 per dozen. GPP sent a request to Guglielmo asking for 500 dozen. On

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May 4, 2011, Guglielmo informed GPP that other Nike representatives would be

contacting them regarding the Vapor One offer. GPP heard nothing despite repeatedly

following up. Mike Francis finally emailed Jeff Williams on June 3, 2011 saying that he

was following up with the Nike personnel who had been involved and hoped to get

everything back on track.

26. Instead of getting back on track, however, the incidents involving unfair

and inequitable treatment simply continued. In February 2012, GPP learned that Nike

was again offering other retailers exclusive deals and promotions not being offered to

GPP. In March 2012, Nike ignored more requests from GPP to run advertisements and

promotions similar to those of other Nike retailers. Also in March 2012, Morici offered

GPP a special Masters promotional package only to then withdraw the offer. In August

2012, GPP inquired about selling Ryder Cup shoes but were told by Nike that they were

being offered exclusively to Medinah Country Club, the host for the 2012 Ryder Cup.

GPP then learned that wasnt true and that Ryder Cup shoes were actually being sold

online.

27. In October 2012, Nikes inequitable treatment of GPP culminated in its

suspension of GPPs account. Nikes notice of suspension was utterly fabricated and

pretextual. Nike complained about GPPs alleged violations of policy this despite the

fact GPP had been conducting itself the same way for at least eight years with Nikes

approval. GPPs account was eventually reinstated but the damage could not be undone.

All of the acts by Nike described above caused more than a 75 percent decline in the sale

of Nike goods by GPP in the last four years and the loss of millions of dollars in revenue.

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V. CAUSES OF ACTION

FIRST CAUSE OF ACTION PRICE DISCRIMINATION UNDER SECTION 2(A)

OF THE ROBINSON-PATMAN ACT

28. Plaintiff incorporates and realleges paragraphs 1 27.

29. As a result of Nikes discriminatory practices in violation of the Robinson-

Patman Act, GPP has suffered damages in the form of lost profits which, under the

Robinson-Patman Act, are trebled.

30. As a result of Nikes ongoing unlawful practices, GPP has lost a significant

number of customers to competitors receiving more favorable pricing and promotions

from Nike. This has forced GPP to reduce the scale of its operation, lay off employees

and reduce wages and benefits for those who remain.

31. Because Nike refused and continues to refuse to stop its ongoing

discriminatory conduct and equalize pricing and promotions consistent with the terms of

the Robinson-Patman Act, GPP continues to suffer ongoing lost profits in an amount to

be proven at trial.

32. Nike should be permanently enjoined from engaging in continued price

discrimination against GPP in violation of the Robinson-Patman Act.

33. GPP is also entitled to an award of its reasonable and necessary attorneys

fees and costs in connection with prosecuting this claim.

SECOND CAUSE OF ACTION VIOLATION OF OREGONS ANTI-PRICE DISCRIMINATION LAW

34. GPP incorporates and realleges paragraphs 1 33.

35. Nikes price discrimination against GPP violates Oregons Anti-Price

Discrimination Law, OR. REV. STAT. ANN. 646.010-646.180 (2011) .

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36. Nike engaged in illegal price discrimination. Because a price differential

between Nikes prices to GPP and those given to GPPs competitors -- those most favored

by Nike during the relevant time period -- GPP suffered damages. OR. REV. STAT. ANN.

646.160 (2011). GPPs damages are trebled pursuant to OR. REV. STAT. ANN.

646.150(1) (2011).

37. Because Nike has refused to stop its ongoing price discrimination

consistent with the terms of Oregons Anti-Price Discrimination Law, GPP continues to

suffer ongoing price discrimination and lost profits in an amount which will be proven at

trial.

38. Nike should be permanently enjoined from engaging in continued price

discrimination against GPP in violation of OR. REV. STAT. ANN. 646.040 (2011). GPP

is additionally entitled to recover its reasonable and necessary attorneys fees. OR. REV.

STAT. ANN. 646.140(1) (2011).

THIRD CAUSE OF ACTION BREACH OF FIDUCIARY DUTY

39. GPP incorporates and realleges paragraphs 1 38.

40. GPP had a fiduciary relationship with Nike. For years, GPP had acted as an agent

for Nike, selling millions of dollars worth of Nike goods and following policies set forth by Nike

in the selling of those goods. The agency relationship gave rise to a duty of mutual trust, confidence

and loyalty between GPP and Nike.

41. Nike breached its fiduciary duty to GPP by the acts described in detail above,

engaging in inequitable pricing schemes and promotions, unlawfully suspending GPPs Nike

account and allowing GPPs competitors to gain an advantage over GPP.

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42. Nikes breach of fiduciary duty injured GPP by causing a loss of profits to be

determined at trial.

FOURTH CAUSE OF ACTION BAD FAITH / UNFAIR DEALING

43. GPP incorporates and realleges paragraphs 1 42.

44. A special relationship existed between Nike and GPP. Nike was the manufacturer

and GPP was its dependent distributor. Not only was Nike GPPs fiduciary, it had vastly superior

bargaining power.

45. This relationship made the injury from breach of this duty foreseeable.

46. Nikes breach caused GPPs injury.

FIFTH CAUSE OF ACTION INTENTIONAL INTERFERENCE WITH ECONOMIC RELATIONS

47. GPP incorporates and realleges paragraphs 1 46.

48. GPP had valid business relationships in the golfing market or expectancy that such

relationships would develop.

49. Through its predatory and retaliatory conduct, Nike purposefully interfered with

GPPs relationships by depriving GPP of products Nike knew GPP would have sold.

50. Nike accomplished this interference through improper means or for an improper

purpose. Specifically, Nike decided to punish GPP simply for doing what other retailers had done

and selling Nike products at discounted prices and making sales on the Internet. Nikes objections,

such as they were, were lodged solely in order to make an example of GPP and demonstrate Nikes

power in the market and ability to whip recalcitrant retailers back into line.

51. Nikes interference with GPPs economic relations with its customers directly

caused GPPs damages.

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52. Damages suffered by GPP as a result of Nikes conduct are substantial.

SIXTH CAUSE OF ACTION NEGLIGENT MISREPRESENTATION

53. GPP incorporates and realleges paragraphs 1 52.

54. As detailed more fully above, Nike made representations to GPP that certain

products were not available and that certain rebate plans and promotions were not available. GPP

relied on those representations and either did not offer those products or purchased the products

for higher prices from other sources. GPP did not receive the rebates being offered to others. Nike

also represented in 2010 that new policies would be put in place within a year and that there would

be no retaliation against GPP for reporting problems to the company. Based on those

representations, GPP continued to try to conduct business with Nike in the same fashion while

Nike was routinely engaging in retaliatory practices and not changing any of its policies.

55. Nike said to GPP that it (GPP) could participate in the sale of shoes specially

designed for the Ryder Cup but then represented the shoes would only be made available to

Medinah Country Club. This was not true and GPP was damaged by not being able to participate

in a promotion built around one of the biggest golf events of the year after planning otherwise.

56. Nike told GPP that the company would participate in demo days after the meeting

in 2010. This was false and, as Nike was well aware, these days set aside by a retailer to

demonstrate and sell equipment from the different brands it markets are never as successful

without a manufacturer representative being present. GPP advertised and marketed the demo days

believing Nike would take part and sales of Nike equipment suffered during demo days as a result

of Nikes absence.

57. Nike told GPP that it was in violation of Nikes MAP policy. This was not true and

the misrepresentations led GPP to price products at a disadvantage to its competitors.

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58. Nike made the above representations in the course of transactions in which Nike

had an interest.

59. Nike made the representations for the guidance of GPP.

60. Nikes representations were misstatements of fact. The products that were

represented to be unavailable were simply not made available to GPP although they could have

been; the same is true of various rebate plans and promotions; no new policies were put in place

by Nike after the meeting that occurred with GPP and there were numerous incidents of retaliation.

61. After representing that the Ryder Cup shoes would only be sold by Medinah

Country Club, it was discovered that the shoes were actually being sold online by another

company. Nike did not participate in demo days at GPP following the meeting that occurred in

October 2010. Other retailers were permitted by Nike to violate its MAP policy while GPP was

required to raise prices to its competitive disadvantage.

62. Nike did not use reasonable care in communicating the information.

63. GPP justifiably relied on Nikes representations.

64. Nikes misrepresentations proximately caused injury to GPP, which resulted in a

loss of profits.

V. JURY DEMAND

65. GPP demands a trial by jury.

VI. PRAYER

66. Plaintiff GPP respectfully requests that upon final trial of this matter, the

Court enter judgment awarding GPP:

A. Actual damages as determined by the jury;

B. Treble damages;

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C. A permanent injunction to prevent Nike from engaging in continued

price discrimination against GPP.

D. Prejudgment and postjudgment interest;

E. Court costs;

F. Attorney fees; and

G. All other relief to which GPP is entitled.

Respectfully submitted,

By: /s/ Chris Bell___________ Chris Bell (cbell@bfjblaw.com) Lead Attorney Texas Bar No. 00783631 4203 Montrose Boulevard, Suite 150

Houston, Texas 77006 713-526-0200 (tel) 832-615-2665 (fax)

OF COUNSEL: BERG FELDMAN JOHNSON BELL, LLP Geoffrey Berg (gberg@bfjblaw.com) Texas Bar No. 00793330 4203 Montrose Boulevard, Suite 150 Houston, Texas 77006 713-526-0200 (tel) 832-615-2665 (fax) Attorneys for Plaintiff Games People Play, Inc.

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing document has been forwarded to all counsel of record via Electronic Court Filing (ECF) on July 2, 2014.

/s/ Chris Bell Chris Bell