LOS ANGELES MEMORIAL, ETC. v. Nat. Football League

• Decision Date: 24 July 1981
• Docket Number: No. 78-3523-HP.,78-3523-HP.
• Citation: 519 F. Supp. 581
• Parties: LOS ANGELES MEMORIAL COLISEUM COMMISSION, Plaintiff, v. NATIONAL FOOTBALL LEAGUE, an unincorporated association, et al., Defendants. OAKLAND RAIDERS, LTD., Cross-Claimant, v. NATIONAL FOOTBALL LEAGUE, an unincorporated association, et al., Cross-Defendants.
• Court: U.S. District Court — Central District of California

519 F. Supp. 581

LOS ANGELES MEMORIAL COLISEUM COMMISSION, Plaintiff, v. NATIONAL FOOTBALL LEAGUE, an unincorporated association, et al., Defendants.

OAKLAND RAIDERS, LTD., Cross-Claimant, v. NATIONAL FOOTBALL LEAGUE, an unincorporated association, et al., Cross-Defendants.

No. 78-3523-HP.

United States District Court, C. D. California.

July 24, 1981.

Blecher, Collins & Hoecker, Maxwell M. Blecher, Howard F. Daniels, M. Brian McMahon, Los Angeles, Cal., for plaintiff, Los Angeles Memorial Coliseum Commission.

O'Melveny & Myers, Patrick Lynch, Clark Waddoups, Los Angeles, Cal., Covington & Burling, Hamilton Carothers, Paul J. Tagliabue, Washington, D. C., for National Football League defendants.

Nelson, Ritchie & Gill, Rodney E. Nelson, Richard G. Ritchie, Los Angeles, Cal., Cotchett, Dyer & Illston, Joseph W. Cotchett, Susan Illston, Rand N. White, San Mateo, Cal., for defendants Los Angeles Rams Football Co. and Georgia Rosenbloom Frontiere.

Alioto & Alioto, Joseph L. Alioto, San Francisco, Cal., Lasky, Haas, Cohler & Munter, Moses Lasky, San Francisco, Cal., for cross-claimant Oakland Raiders, Ltd.

Crosby, Heafey, Roach & May, Edwin A. Heafey, Timothy J. Murphy, Oakland, Cal., for intervenors, Oakland-Alameda County Coliseum.

Flint & MacKay, Michael K. Inglis, Robert F. Kull, Frank Gooch, III, Richard Gilcrest, Los Angeles, Cal., for Melvin Durslag and Scot J. Paltrow.

MEMORANDUM AND ORDER GRANTING DIRECTED VERDICT FOR PLAINTIFF AND CROSS-COMPLAINANT ON SINGLE ENTITY ISSUE

PREGERSON, Circuit Judge.

This matter is before the court on cross-motions filed, pursuant to Fed.R.Civ.P. 50(a), by the plaintiff Los Angeles Memorial Coliseum Commission, the cross-claimant Oakland Raiders, and the NFL defendants, seeking entry of a directed verdict with respect to the defendants' contention that the NFL is a single economic entity for purposes of this lawsuit and hence cannot as a matter of law have violated section 1 of the Sherman Act. Having studied the parties' briefs and heard the oral argument of counsel on July 24, 1981, the court concludes that the motions of the Coliseum Commission and the Raiders should be granted and that of the NFL denied.

The Los Angeles Memorial Coliseum Commission originally moved before trial for partial summary judgment on the single entity issue. The court denied that motion because it appeared that proper resolution of the issue could well depend on the factual evidence adduced at the trial. Because summary judgment is proper only when it is quite clear what the truth is, Poller v. CBS, 368 U.S. 464, 467, 82 S.Ct. 486, 488, 7 L.Ed.2d 458 (1962), a district court may properly deny summary judgment even where it would be technically proper, so that the case may be fully developed at trial. Roberts v. Browning, 610 F.2d 528, 536 (8th Cir. 1979).

That development has now occurred, and it is apparent that there are no genuine issues of material fact concerning the single entity question. The parties' disagreement concerns the legal effect to be given to the undisputed facts. The question is a close one, and the court has benefitted greatly from the briefs and oral arguments of the parties. Careful consideration of the legal arguments put forward by the Coliseum and by the NFL have convinced this court that the undisputed facts preclude treating the NFL as a single entity for purposes of this lawsuit.

On its face, the NFL certainly appears to be an association of separate business entities rather than one single enterprise. The twenty-eight member clubs are separate legal entities — some corporations, some partnerships, and some sole proprietorships. No two clubs have a common owner. The clubs share a large part, but not all, of their revenues. They do not share their profits or losses. They are managed independently, each making its own decisions concerning ticket prices, player acquisitions and salaries, the hiring of coaches and administrators, and the terms of their stadium leases. They do not exchange or share their accounting books and records.

The Supreme Court has consistently rejected the single-entity argument in circumstances more favorable to that argument than those presented in this case. Firms with a high degree of common ownership have been held separate for Sherman Act purposes. See Timken Roller Bearing Co. v. United States, 341 U.S. 593, 597-98, 71 S.Ct. 971, 974, 95 L.Ed. 1199 (1951); Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211, 215, 71 S.Ct. 259, 261, 95 L.Ed. 219 (1951); United States v. Yellow Cab Co., 332 U.S. 218, 227-28, 67 S.Ct. 1560, 1565, 91 L.Ed. 2010 (1947). Indeed, even a parent corporation and its subsidiary have been held separate entities in a Sherman Act context: since they had "availed themselves of the privilege of doing business through separate corporations, the fact of common ownership could not save them from any of the obligations that the law imposes on separate entities." Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 141-42, 88 S.Ct. 1981, 1985-86, 20 L.Ed.2d 982 (1968).

The Ninth Circuit has taken a similarly unreceptive view of single-entity claims, as demonstrated by Knutson v. Daily Review, Inc., 548 F.2d 795 (9th Cir. 1976), cert. denied, 433 U.S. 910, 97 S.Ct. 2977, 53 L.Ed.2d 1094 (1977). The defendants there were two newspaper-publishing corporations, one a wholly-owned subsidiary of the other. The Ninth Circuit was reluctant to characterize these firms as a single entity for Sherman Act purposes, stating only (in dictum) that they were "arguably" one enterprise. Yet not only were the two firms parent and subsidiary, but one individual had control of the parent, was president of both corporations, and published all of both companies' newspapers. Moreover, the firms shared many key personnel, their newspapers exhibited numerous common features, and the two companies did not compete. If all these features together were insufficient to establish a single enterprise, it is difficult to see how the NFL can constitute a single entity when it possesses none of those features.¹

The League argues, however, that the unitary nature of the product it creates— NFL football—necessarily implies that it is a single entity. "The economic substance is that of a single firm selling a single product involving a necessary contribution from each member." NFL Opposition at 3. This argument suffers from several defects.

In the first place, the argument, if valid, would prove too much. If the NFL must be treated as a single entity in this lawsuit simply because all its teams must cooperate to produce the League product, the NFL should be just as much a single entity—and hence just as incapable of violating section 1 of the Sherman Act—in cases challenging League restrictions on the acquisition of players. Yet such League rules have repeatedly been found to violate section 1. Smith v. Pro Football, Inc., 593 F.2d 1173 (D.C.Cir.1978); Mackey v. NFL, 543 F.2d 606 (8th Cir. 1976), cert. dismissed, 434 U.S. 801, 98 S.Ct. 28, 54 L.Ed.2d 59 (1977); Kapp v. NFL, 390 F.Supp. 73 (N.D.Cal.1974), aff'd on other grounds, 586 F.2d 644 (9th Cir. 1978).²

Secondly, organizations whose product is just as unitary as the NFL's and requires the same kind of cooperation from the organization's members, have been found to violate section 1 of the Sherman Act. The clearest instance is Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945), where Associated Press bylaws aimed at preventing competitors of existing members from joining the association were held unlawful. Associated Press was an incorporated membership association whose members were newspapers. It gathered and distributed "news which its member papers cannot collect single-handed, and which requires their pooled resources." Id. at 26 (Frankfurter, J., concurring). This was a product or service distinct from that of the member publishers, and one requiring the cooperation of all the members, none of whom had the facilities or resources to produce AP's stream of worldwide news. Yet the Court had no trouble finding AP's anticompetitive bylaws a restraint of trade.³ Likewise, in Silver v. New York Stock Exchange, 373 U.S. 341, 365, 83 S.Ct. 1246, 1261, 10 L.Ed.2d 389 (1963), the Court held that the Exchange had violated section 1 of the Sherman Act. Yet the Exchange "performed an important function" by "serving ... as an indispensable mechanism through which corporate securities can be bought and sold" —a function that none of its individual broker-members could perform on its own. Id. at 349, 83 S.Ct. at 1253.⁴

A third problem with the NFL's argument is that it seems to rest on a false premise—that the individual NFL clubs are not separate business entities whose products have an independent value. The League may be correct when it characterizes its member clubs as "entities which have capacity to be competitors only when acting jointly with members of a common enterprise." NFL Brief on Cross-Motions for Directed Verdict re Single Entity, filed July 23, 1981 hereinafter NFL Brief, at 21. But this means only that each club must act jointly with some other teams in some cooperative framework in order to produce football games. It does not show that each club can produce football games only as an NFL member. Indeed, many of the current NFL members—including plaintiff Raiders—previously operated as members of a rival football league. There is no conceptual reason why any NFL team could not decide to pull out and join a new league.⁵ Thus, although the Raiders can create a product only in collaboration with other teams, it does not...