Chicago Professional Sports Ltd. Partnership v. National Basketball Ass'n

• Decision Date: 07 October 1996
• Docket Number: Nos. 95-1341,95-3935 and 95-4021,95-1376,s. 95-1341
• Parties: 1996-2 Trade Cases P 71,554 CHICAGO PROFESSIONAL SPORTS LIMITED PARTNERSHIP and WGN Continental Broadcasting Company, Plaintiffs-Appellees, Cross-Appellants, v. NATIONAL BASKETBALL ASSOCIATION, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 593

95 F.3d 593

1996-2 Trade Cases P 71,554

CHICAGO PROFESSIONAL SPORTS LIMITED PARTNERSHIP and WGN Continental Broadcasting Company Plaintiffs-Appellees, Cross-Appellants, v. NATIONAL BASKETBALL ASSOCIATION, Defendant-Appellant, Cross-Appellee.

Nos. 95-1341, 95-1376, 95-3935 and 95-4021.

United States Court of Appeals Seventh Circuit.

Argued June 4, 1996.

Decided Sept. 10, 1996.

Rehearing and Suggestion for Rehearing

En Banc Denied Oct. 7, 1996. ^*

James E. Hanlon, Jr., Joel G. Chefitz (argued), Stephen D. Libowsky, Laura Keidan Martin, Ronald S. Betman, Robert K. Niewijk, Katten, Muchin & Zavis, Chicago, IL, for Chicago Professional Sports Ltd. Partnership, in Nos. 95-1341, 95-1376.

James E. Hanlon, Jr., Joel G. Chefitz (argued), Stephen D. Libowsky, Laura Keidan Martin, Ronald S. Betman, Robert K. Niewijk, Wendy Fleishman, Katten, Muchin & Zavis, Chicago, IL, for Chicago Professional Sports Ltd. Partnership, in No. 95-3935.

James E. Hanlon, Jr., Katten, Muchin & Zavis, John R. McCambridge (argued), Darrell J. Graham, Irving C. Faber, Charles S. Bergen, Christopher B. Wilson, Grippo & Elden, Chicago, IL, Charles J. Sennet, Tribune Co., Chicago, IL, for WGN Continental Broadcasting, Inc., in No. 95-1341.

John R. McCambridge (argued), Darrell J. Graham, Irving C. Faber, Michael P. Conway, Charles S. Bergen, Christopher B. Wilson, Grippo & Elden, Chicago, IL, Charles J. Sennet, Tribune Co., Chicago, IL, for WGN Continental Broadcasting, Inc., in No. 95-1376.

James E. Hanlon, Jr., Katten, Muchin & Zavis, John R. McCambridge (argued), Darrell J. Graham, Michael P. Conway, Charles S. Bergen, Christopher B. Wilson, Grippo & Elden, Chicago, IL, Charles J. Sennet, Tribune Co., Chicago, IL, for WGN Continental Broadcasting, Inc., in No. 95-3935.

James E. Hanlon, Jr., Katten, Muchin & Zavis, John R. McCambridge (argued), Darrell J. Graham, Irving C. Faber, Michael P. Conway, Charles S. Bergen, Christopher B. Wilson, Grippo & Elden, Chicago, IL, Charles J. Sennet, Tribune Co., Chicago, IL, for WGN Continental Broadcasting, Inc., in No. 95-4021.

Marc J. Goldstein, Michael A. Cardoza, Bradley I. Ruskin, Steven C. Krane, Stephen D. Solomon, Ronald S. Rauchberg, Howard L. Ganz, Francis D. Landrey, Stephen L. Weinstein, Proskauer, Rose, Goetz & Mendelsohn, New York City, Christopher Wolf, Warren L. Dennis, Proskauer, Rose, Goetz & Mendelsohn, Washington, DC, James C. Schroeder, Tyrone C. Fahner, Andrew S. Marovitz, Matthew A. Rooney, Herbert L. Zarov, John E. Muench, Mayer, Brown & Platt, Chicago, IL, Carole E. Handler, Proskauer, Rose, Goetz & Mendelsohn, Los Angeles, CA, Jeffrey A. Mishkin (argued), National Basketball Ass'n, Office of the General Counsel, New York City, for National Basketball Ass'n, in No. 95-1341.

Herbert L. Zarov, Mayer, Brown & Platt, Washington, D, Marc J. Goldstein, Michael A. Cardoza, Bradley I. Ruskin, Steven C. Krane, Stephen D. Solomon, Ronald S. Rauchberg, Howard L. Ganz, Francis D. Landrey, Stephen L. Weinstein, Proskauer, Rose, Goetz & Mendelsohn, New York City, Christopher Wolf, Warren L. Dennis, Proskauer, Rose, Goetz & Mendelsohn, Washington, DC, James C. Schroeder, Tyrone C Fahner, Kenneth E. Wile, Andrew S. Marovitz, Matthew A. Rooney, John E. Muench, Mayer, Brown & Platt, Chicago, IL, Carole E. Handler, Proskauer, Rose, Goetz & Mendelsohn, Los Angeles, CA, Jeffrey A. Mishkin (argued), Richard W. Buchanan, National Basketball Ass'n, Office of the General Counsel, New York City, for National Basketball Ass'n, in No. 95-1376.

Michael A. Cardoza, Bradley I. Ruskin, Stephen D. Solomon, Ronald S. Rauchberg, Stephen L. Weinstein, Proskauer, Rose, Goetz & Mendelsohn, New York City, Christopher Wolf, Warren L. Dennis, Proskauer, Rose, Goetz & Mendelsohn, Washington, DC, James C. Schroeder, Andrew S. Marovitz, Matthew A. Rooney, Herbert L. Zarov, Mayer, Brown & Platt, Chicago, IL, Carole E. Handler, Proskauer, Rose, Goetz & Mendelsohn, Los Angeles, CA, Jeffrey A. Mishkin (argued), Richard W. Buchanan, National Basketball Ass'n, Office of the General Counsel, New York City, for National Basketball Ass'n, in No. 95-3935.

Marc J. Goldstein, Michael A. Cardoza, Bradley I. Ruskin, Steven C. Krane, Stephen D. Solomon, Ronald S. Rauchberg, Howard L. Ganz, Francis D. Landrey, Stephen L. Weinstein, Proskauer, Rose, Goetz & Mendelsohn, New York City, Christopher Wolf, Warren L. Dennis, Proskauer, Rose, Goetz & Mendelsohn, Washington, DC, James C. Schroeder, Tyrone C. Fahner, Andrew S. Marovitz, Matthew A. Rooney, Herbert L. Zarov, John E. Muench, Mayer, Brown & Platt, Chicago, IL, Carole E. Handler, Proskauer, Rose, Goetz & Mendelsohn, Los Angeles, CA, Jeffrey A. Mishkin (argued), Richard W. Buchanan, National Basketball Ass'n, Office of the General Counsel, New York City, for National Basketball Ass'n, in No. 95-4021.

Before BAUER, CUDAHY, and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

In the six years since they filed this antitrust suit, the Chicago Bulls have won four National Basketball Association titles and an equal number of legal victories. Suit and titles are connected. The Bulls want to broadcast more of their games over WGN television, a "superstation" carried on cable systems nationwide. The Bulls' popularity makes WGN attractive to these cable systems; the large audience makes WGN attractive to the Bulls. Since 1991 the Bulls and WGN have been authorized by injunction to broadcast 25 or 30 games per year. 754 F.Supp. 1336 (1991). We affirmed that injunction in 1992, see 961 F.2d 667, and the district court proceeded to determine whether WGN could carry even more games--and whether the NBA could impose a "tax" on the games broadcast to a national audience, for which other superstations have paid a pretty penny to the league. After holding a nine-week trial and receiving 512 stipulations of fact, the district court made a 30-game allowance permanent, 874 F.Supp. 844 (1995), and held the NBA's fee excessive, 1995-2 Trade Cas. para. 71,253. Both sides appeal. The Bulls want to broadcast 41 games per year over WGN; the NBA contends that the antitrust laws allow it to fix a lower number (15 or 20) and to collect the tax it proposed. With apologies to both sides, we conclude that they must suffer through still more litigation.

Our 1992 opinion rejected the league's defense based on the Sports Broadcasting Act, 15 U.S.C. §§ 1291-95, but our rationale implied that the NBA could restructure its contracts to take advantage of that statute. 961 F.2d at 670-72. In 1993 the league tried to do so, signing a contract that transfers all broadcast rights to the National Broadcasting Company. NBC shows only 26 games during the regular season, however, and the network contract allows the league and its teams to permit telecasts at other times. Every team received the right to broadcast all 82 of its regular-season games (41 over the air, 41 on cable), unless NBC telecasts a given contest. The NBA-NBC contract permits the league to exhibit 85 games per year on superstations. Seventy were licensed to the Turner stations (TBS and TNT), leaving 15 potentially available for WGN to license from the league. It disdained the opportunity. The Bulls sold 30 games directly to WGN, treating these as over-the-air broadcasts authorized by the NBC contract--not to mention the district court's injunction. The Bulls' only concession (perhaps more to the market than to the league) is that WGN does not broadcast a Bulls game at the same time as a basketball telecast on a Turner superstation.

Back in 1991 and 1992, the parties were debating whether the NBA's television arrangements satisfied § 1 of the Sports Broadcasting Act, 15 U.S.C. § 1291. We held not, because the Act addresses the effects of "transfers" by a "league of clubs," and the NBA had prescribed rather than "transferred" broadcast rights. The 1993 contract was written with that distinction in mind. The league asserted title to the copyright interests arising from the games and transferred all broadcast rights to NBC; it received some back, subject to contractual restrictions. Section 1 has been satisfied. But the league did not pay enough attention to § 2, 15 U.S.C. § 1292, which reads:

Section 1291 of this title shall not apply to any joint agreement described in the first sentence in such section which prohibits any person to whom such rights are sold or transferred from televising any games within any area, except within the home territory of a member club of the league on a day when such club is playing at home.

The NBA-NBC contract permits each club to license the broadcast of its games, and then, through the restriction on superstation broadcasts, attempts to limit telecasts to the teams' home markets. Section 2 provides that this makes § 1 inapplicable, so the Sports Broadcasting Act leaves the antitrust laws in force.

Our prior opinion observed that the Sports Broadcasting Act, as a special-interest exception to the antitrust laws, receives a beady-eyed reading. A league has to jump through every hoop; partial compliance doesn't do the trick. The NBA could have availed itself of the Sports Broadcasting Act by taking over licensing and by selling broadcast rights in the Bulls' games to one of the many local stations in Chicago, rather than to WGN. The statute offered other options as well. Apparently the league did not want to use them, in part for tax reasons and in part because it sought to avoid responsibilities that come from being a licensor, rather than a regulator, of telecasts. Such business decisions are understandable and proper, but they have consequences under the Sports Broadcasting Act. By signing a contract with NBC that left the Bulls, rather than the league, with the authority to select the TV station that would broadcast the games, the NBA made its position under the Sports Broadcasting Act untenable. For as soon as the Bulls picked WGN, any effort to control cable system retransmission of the...