807 F.2d 520 (7th Cir. 1986), 85-1453, Fishman v. Estate of Wirtz

Docket Nº:85-1453, 85-1545.
Citation:807 F.2d 520
Party Name:1987-1 Trade Cases 67,536 Marvin L. FISHMAN and Illinois Basketball, Inc., Plaintiffs-Appellees, v. ESTATE OF Arthur M. WIRTZ, et al., Defendants-Appellants. and ILLINOIS BASKETBALL, INC., Plaintiff-Appellant, v. ESTATE OF Arthur M. WIRTZ, et al., Defendants-Appellees.
Case Date:November 21, 1986
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 520

807 F.2d 520 (7th Cir. 1986)

1987-1 Trade Cases 67,536

Marvin L. FISHMAN and Illinois Basketball, Inc., Plaintiffs-Appellees,

v.

ESTATE OF Arthur M. WIRTZ, et al., Defendants-Appellants.

and

ILLINOIS BASKETBALL, INC., Plaintiff-Appellant,

v.

ESTATE OF Arthur M. WIRTZ, et al., Defendants-Appellees.

Nos. 85-1453, 85-1545.

United States Court of Appeals, Seventh Circuit

November 21, 1986

Argued Feb. 24, 1986.

[*]

As Amended March 3, 1987.

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Donald R. Harris, Jenner & Block, Chicago, Ill., for defendants-appellants.

Bruce S. Sperling, Sperling, Paul E. Slater, Slater & Spitz, Chicago, Ill., for plaintiffs-appellees.

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Before CUDAHY and EASTERBROOK, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.

CUDAHY, Circuit Judge.

This appeal concerns the 1972 purchase by defendant Chicago Professional Sports Corporation ("CPSC") of the Chicago Bulls professional basketball team. Plaintiffs Illinois Basketball, Inc. ("IBI") and Marvin Fishman, who had also sought to purchase the Bulls, brought suit alleging that the Bulls had been acquired through violations of the Sherman Act and Illinois common law. The district court found that IBI and CPSC had been competing to control a natural monopoly market in the presentation of live professional basketball in Chicago. In the court's view, the plaintiffs had "won" when they executed a contract with the Bulls' former owners. The sale was, however, contingent upon the approval of the National Basketball Association ("NBA"), and the court found that the defendants had set out to destroy the plaintiffs' victory through anticompetitive acts. It ruled that they had violated sections 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1, 2 (1982), by refusing the plaintiffs a lease at the Chicago Stadium and by participating, with certain NBA members, in a group boycott of IBI, and it awarded plaintiff IBI treble damages for these violations. The court also ruled that the defendants had interfered with IBI's contract rights and prospective advantage in violation of Illinois law and entered an alternative judgment for actual and punitive damages.

We agree with the district court that the refusal to lease the Chicago Stadium violated sections 1 and 2 and constituted tortious interference with prospective advantage, and we affirm its judgment as to liability on these bases. We do not agree that the judgment can be sustained on the NBA boycott claim or on the claim based on tortious interference with contract. We also believe that the district court erred in its award of damages and that the case must be remanded on that account.

I. LIABILITY ISSUES

  1. Facts

    The facts as found by the district court are set out at length in the district court opinion. Fishman v. Wirtz, 1981-2 Trade Cas. (CCH) p 64,378 (N.D.Ill. Oct. 28, 1981) ("Liability Opinion"). We set forth only those that are necessary to understand the issues on appeal.

    1. Negotiations to Purchase the Bulls. In 1971 the Chicago Professional Basketball Corporation ("Chicago Basketball") decided to sell the Chicago Bulls. Plaintiff Fishman formed an investors' group (which included defendants Albert Adelman, Lester Crown, Philip Klutznick and James Cook and non-defendants Edward Ginsberg and George Steinbrenner III) to investigate purchasing the Bulls. By January 1972 this group had reached an agreement in principle with Chicago Basketball to acquire the Bulls for $3.3 million. Several members of the Fishman group thought it unwise to buy the team without a lease commitment from a local arena, and Chicago Basketball president Elmer Rich arranged a meeting between the group and Arthur Wirtz, who with his son William, controlled defendant Chicago Stadium Corporation ("CSC"). The Bulls had been playing at the Chicago Stadium under a series of short-term leases. 1 The group asked Wirtz for a three-year lease at a lower rate than that which Chicago Basketball was paying. Wirtz refused and, in

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    light of this rejection, the group made Rich a lower offer for the Bulls, which was rejected.

    Fishman then formed a new investors' group, later incorporated as IBI, 2 which resumed negotiations with Rich. By April 1972, he had competition: first, Peter Graham, a Vancouver investor and owner of an arena in San Diego, and, second, a group largely composed of the other members of the first Fishman group (with the addition of Arthur Wirtz). This group was later incorporated as defendant CPSC. 3 Between March and May 1972, Graham and IBI both offered to purchase the Bulls for $3.25 million; CPSC offered $3.3 million. Chicago Basketball rejected Graham's offer on May 4, 1972, and Graham dropped out of the competition. Negotiations continued with both IBI and CPSC. On June 2, 1972, IBI submitted to the Bulls' attorney a signed offer to buy the Bulls for $3.3 million; that same day the Bulls' Executive Committee recommended that IBI's offer be accepted because IBI was willing to pay all cash at closing. Rich wrote to Adelman, advising CPSC of this recommendation. On June 5, 1972, Adelman telephoned Rich and attempted to renew negotiations on CPSC's behalf. Adelman reminded Rich that Fishman's group had no place to play and still needed NBA approval. Rich responded to Adelman by letter dated June 7, stating that he did not see how an offer by CPSC could get preference over IBI's. He also advised Adelman, however, that if CPSC wanted to make a new offer it would have to submit a signed contract incorporating all terms required by Chicago Basketball.

    On June 9, CPSC sent Chicago Basketball an executed stock purchase agreement and a cashier's check for $3.3 million. This time, CPSC also agreed to pay the entire purchase price in cash at the closing. On June 12, Ginsberg telephoned Rich and increased the CPSC offer by $50,000 in order to top IBI's offer. Finally, on June 13, CPSC again modified the stock purchase agreement in hopes of winning Rich's approval.

    Nevertheless, on June 14, 1972, Chicago Basketball formally accepted and executed IBI's contract. The contract provided that any sale was subject to approval by the NBA and obligated Chicago Basketball to use its best efforts to secure NBA approval. The district court found:

    IBI's contract and offer was [sic] perceived by the Bulls to be preferable to CPSC's offer for several reasons, among them was the fact that various ambiguities and problems in the CPSC offer would require additional negotiations, with what was viewed as, the somewhat difficult CPSC group, and it was unlikely, as a consequence, that the agreement would be ready for presentation at the June 15-16 NBA meeting.

    Liability Opinion, 1981-2 Trade Cas. at 74,748.

    2. The June NBA Meeting. The NBA Constitution provides that all business and policy decisions of the NBA are to be made by its Board of Governors, which is comprised of one representative from each NBA franchise. Any transfer or sale of ten percent or more of any franchise must be approved by three-quarters of the Board of Governors. Thus, the contract between IBI and Chicago Basketball needed the affirmative vote of thirteen out of seventeen governors for the sale to become final. The NBA Board of Governors met in White Sulphur Springs, West Virginia on June 15-16, 1972. By that time, the NBA Commissioner and NBA Finance Committee had investigated and approved IBI's financial and moral fitness to be the owner of an NBA franchise, and the proposed sale was

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    on the agenda for presentation to the full Board at the June meeting.

    Prior to the execution of the IBI-Chicago Basketball contract, several CPSC shareholders had sent telegrams to the NBA Commissioner and the Board of Governors advising them that CPSC's cash offer for the Bulls was larger than IBI's and that "[w]e have reached an agreement with Arthur Wirtz owner of the Chicago Stadium for a ten year lease which insures the availability of the best arena with the largest seating capacity in Chicago at which the Chicago Bowls [sic] can play." CPSC also sent its president, James Cook, and its attorney to White Sulphur Springs, although CPSC had no scheduled business before the NBA. On the evening of June 14, Cook discussed CPSC's position with several NBA members; he later admitted that "his purpose was to secure nonapproval of the transfer to IBI as this would be the only possible way his group could possibly acquire the Bulls." Id. at 74,749.

    On June 15, Rich presented the proposed sale of the Bulls to the Board of Governors. Only ten of the seventeen governors voted to approve the transfer. 4 Two reasons for not approving the transfer to IBI were mentioned: (1) IBI did not have a lease and, specifically, did not have a lease at the Chicago Stadium, and (2) CPSC had made it known that it wanted to purchase the Bulls. After the vote, it was suggested that, since IBI's primary problem was the lack of a lease, the negative vote be rescinded to allow IBI to secure a lease commitment. The proposed transfer could then be presented at the next NBA meeting, to be held in New York City on July 11, 1972.

    3. IBI's Efforts to Acquire a Stadium Lease. After being informed that a stadium lease was the prerequisite to NBA approval, Rich and Fishman decided to each approach Wirtz separately to discuss acquiring a lease at the Chicago Stadium. From June 19 to June 29, 1972, Fishman attempted to arrange a meeting with Wirtz, but Wirtz would not see him or return his telephone calls. Wirtz did, however, meet with Rich on June 21. At this meeting, Wirtz told Rich that he would not discuss a lease with Fishman because IBI did not own the Bulls. He told Rich that he would consider giving Chicago Basketball (Rich's organization) a ten-year lease, which would be assignable only if Chicago Basketball "guaranteed"...

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