Mackey v. National Football League, No. 76-1184

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Writing for the Court: Before GIBSON, Chief Judge, LAY and WEBSTER; LAY; Frank
• Citation: 543 F.2d 606
• Parties: 1976-2 Trade Cases 61,119 John MACKEY et al., Appellees, v. NATIONAL FOOTBALL LEAGUE et al., Appellants.
• Docket Number: No. 76-1184
• Decision Date: 23 November 1976

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543 F.2d 606 1976-2 Trade Cases 61,119 John MACKEY et al., Appellees,
v.
NATIONAL FOOTBALL LEAGUE et al., Appellants. No. 76-1184. United States Court of Appeals,
Eighth Circuit. Submitted June 17, 1976.
Decided Oct. 18, 1976.
Rehearing Denied Nov. 23, 1976

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Daniel M. Gribbon, Washington, D. C., John D. French, Minneapolis, Minn., for appellants; James B. Loken, Minneapolis, Minn., on brief for Natl. Football League and Alvin Ray Rozelle; James C. McKay, Paul J. Tagliabue and Theodore Voorhees, Jr., Covington & Burling, Washington, D. C., and Irving R. Brand, Maslon, Kaplan, Edelman, Borman, Brand & McNulty, Minneapolis, Minn., on brief for 26 Member Clubs of the Nat'l. Football League.

Edward M. Glennon, Minneapolis, Minn., for appellees; Mark R. Johnson, Ronald L. Rollins, of Lindquist & Vennum, Minneapolis, Minn., on brief.

Before GIBSON, Chief Judge, LAY and WEBSTER, Circuit Judges.

LAY, Circuit Judge.

This is an appeal by the National Football League (NFL), twenty-six of its member clubs, and its Commissioner, Alvin Ray "Pete" Rozelle, from a district court judgment holding the "Rozelle Rule" ¹ to be violative of § 1 of the Sherman Act, and enjoining its enforcement.

This action was initiated by a group of present and former NFL players, ² appellees herein, pursuant to §§ 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, and § 1 of the Sherman Act, 15 U.S.C. § 1. Their complaint alleged that the defendants' enforcement of the Rozelle Rule constituted an illegal combination and conspiracy in restraint of trade denying professional football players the right to freely contract for their services. Plaintiffs sought injunctive relief and treble damages.

The district court, the Honorable Earl R. Larson presiding, conducted a plenary trial which consumed 55 days and produced a transcript in excess of 11,000 pages. At the conclusion of trial, the court entered extensive findings of fact and conclusions of law. ³ The court granted the injunctive relief sought by the players and entered judgment in their favor on the issue of liability. ⁴ This appeal followed.

The district court held that the defendants' enforcement of the Rozelle Rule constituted a concerted refusal to deal and a group boycott, and was therefore a per se violation of the Sherman Act. Alternatively, finding that the evidence offered in support of the clubs' contention that the Rozelle Rule is necessary to the successful operation of the NFL insufficient to justify the restrictive effects of the Rule, the court concluded that the Rozelle Rule was invalid under the Rule of Reason standard. Finally, the court rejected the clubs' argument that the Rozelle Rule was immune from attack under the Sherman Act because it had been the subject of a collective bargaining agreement between the club owners and the National Football League Players Association (NFLPA).

The defendants raise two basic issues on this appeal: (1) whether the so-called labor exemption to the antitrust laws immunizes the NFL's enforcement of the Rozelle Rule from antitrust liability; and (2) if not, whether the Rozelle Rule and the manner in which it has been enforced violate the antitrust

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laws. Ancillary to these contentions, appellants attack a number of the district court's findings of fact and raise several subsidiary issues.

HISTORY.

We first turn to a brief examination of the pertinent history and operating principles of the National Football League.

The NFL, which began operating in 1920, is an unincorporated association comprised of member clubs which own and operate professional football teams. It presently enjoys a monopoly over major league professional football in the United States. The League performs various administrative functions, including organizing and scheduling games, and promulgating rules. A constitution and bylaws govern its activities and those of its members. Pete Rozelle, Commissioner of the NFL since 1960, is an employee of the League and its chief executive officer. His powers and duties are defined by the NFL Constitution and Bylaws.

Throughout most of its history, the NFL's operations have been unilaterally controlled by the club owners. In 1968, however, the NLRB recognized the NFLPA as a labor organization, within the meaning of 29 U.S.C. § 152(5), and as the exclusive bargaining representative of all NFL players, within the meaning of 29 U.S.C. § 159(a). Since that time, the NFLPA and the clubs have engaged in collective bargaining over various terms and conditions of employment. Two formal agreements have resulted. The first, concluded in 1968, was in effect from July 15, 1968 to February 1, 1970. The second, entered into on June 17, 1971, was made retroactive to February 1, 1970, and expired on January 30, 1974. Since 1974, the parties have been negotiating; however, they have not concluded a new agreement.

For a number of years, the NFL has operated under a reserve system whereby every player who signs a contract with an NFL club is bound to play for that club, and no other, for the term of the contract plus one additional year at the option of the club. The cornerstones of this system are § 15.1 of the NFL Constitution and Bylaws, which requires that all club-player contracts be as prescribed in the Standard Player Contract adopted by the League, and the option clause embodied in the Standard Player Contract. ⁵ Once a player signs a Standard Player Contract, he is bound to his team for at least two years. He may, however, become a free agent at the end of the option year by playing that season under a renewed contract rather than signing a new one. A player "playing out his option" is subject to a 10% salary cut during the option year.

Prior to 1963, a team which signed a free agent who had previously been under contract to another club was not obligated to compensate the player's former club. In 1963, after R. C. Owens played out his option with the San Francisco 49ers and signed a contract with the Baltimore Colts, the member clubs of the NFL unilaterally adopted the following provision, now known as the Rozelle Rule, as an amendment to the League's Constitution and Bylaws:

Any player, whose contract with a League club has expired, shall thereupon become a free agent and shall no longer be considered a member of the team of that club following the expiration date of such contract. Whenever a player, becoming

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a free agent in such manner, thereafter signed a contract with a different club in the League, then, unless mutually satisfactory arrangements have been concluded between the two League clubs, the Commissioner may name and then award to the former club one or more players, from the Active, Reserve, or Selection List (including future selection choices) of the acquiring club as the Commissioner in his sole discretion deems fair and equitable; any such decision by the Commissioner shall be final and conclusive.

This provision, unchanged in form, is currently embodied in § 12.1(H) of the NFL Constitution. The ostensible purposes of the rule are to maintain competitive balance among the NFL teams and protect the clubs' investment in scouting, selecting and developing players. ⁶

During the period from 1963 through 1974, 176 players played out their options. ⁷ Of that number, 34 signed with other teams. In three of those cases, the former club waived compensation. In 27 cases, the clubs involved mutually agreed upon compensation. Commissioner Rozelle awarded compensation in the four remaining cases. ⁸

We turn now to the contentions of the parties.

THE LABOR EXEMPTION ISSUE.

We review first the claim that the labor exemption immunizes the Commissioner and the clubs from liability under the antitrust laws. Analysis of this contention requires a basic understanding of the legal principles surrounding the labor exemption and consideration of the factual record developed at trial.

History.

The concept of a labor exemption from the antitrust laws finds its basic source in §§ 6 and 20 of the Clayton Act, 15 U.S.C. § 17 and 29 U.S.C. § 52, and the Norris-LaGuardia Act, 29 U.S.C. §§ 104, 105 and 113. Those provisions declare that labor unions are not combinations or conspiracies in restraint of trade, and specifically exempt certain union activities such as secondary picketing and group boycotts from the coverage of the antitrust laws. See Connell Co. v. Plumbers & Steamfitters, 421 U.S. 616, 621-22, 95 S.Ct. 1830, 44 L.Ed.2d 418 (1975). The statutory exemption was created to insulate legitimate collective activity by employees, which is inherently anticompetitive but is favored by federal labor policy, from the proscriptions of the antitrust laws. See Apex Hosiery Co. v. Leader, 310 U.S. 469, 60 S.Ct. 982, 84 L.Ed. 1311 (1940).

The statutory exemption extends to legitimate labor activities unilaterally undertaken by a union in furtherance of its own interests. See United States v. Hutcheson, 312 U.S. 219, 61 S.Ct. 463, 85 L.Ed. 788 (1941). It does not extend to concerted action or agreements between unions and non-labor groups. The Supreme Court has held, however, that in order to properly accommodate the congressional policy favoring free competition in business markets with the congressional policy favoring collective bargaining under the National Labor Relations Act, 29 U.S.C. § 151 et seq., certain union-employer agreements

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must be accorded a limited nonstatutory exemption from antitrust sanctions. See Connell Co. v. Plumbers & Steamfitters, supra; Meat Cutters v. Jewel Tea, 381 U.S. 676, 85 S.Ct. 1596, 14 L.Ed.2d 640 (1965). See generally Morris, The Developing Labor Law 807-16 (1971). ⁹

The players assert that only employee groups are entitled to the labor exemption and that it cannot be asserted by the defendants, an employer group. We must disagree. Since the basis of the nonstatutory exemption is the national policy favoring collective bargaining, and since the...