Marucci Sports, L.L.C. v. Nat'l Collegiate Athletic Ass'n

• Decision Date: 06 May 2014
• Docket Number: No. 13–30568.,13–30568.
• Citation: 751 F.3d 368
• Parties: MARUCCI SPORTS, L.L.C., Plaintiff–Appellant, v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION; The National Federation of State High School Associations, Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

751 F.3d 368

MARUCCI SPORTS, L.L.C., Plaintiff–Appellant,

v.NATIONAL COLLEGIATE ATHLETIC ASSOCIATION; The National Federation of State High School Associations, Defendants–Appellees.

No. 13–30568.

United States Court of Appeals,Fifth Circuit.

May 6, 2014.

Kevin Oliver Ainsworth, David Paul Borghardt, Esq., William Lee Schuette, Jr., Jones Walker LLP, Baton Rouge, LA, Mark Aaron Cunningham, Jones Walker LLP, New Orleans, LA, Jay K. Reisinger, Farrell & Reisinger, Pittsburgh, PA, for Plaintiff–Appellant.

Philip D. Bartz, Esq., Nicholas S. Sloey, Esq., Bryan Cave, L.L.P., Washington, DC, Rebecca A. Nelson, Bryan Cave, L.L.P., Saint Louis, MO, Gregory M. Bentz, Kansas City, MO, Shelton Dennis Blunt, Kelly Kromer Boudreaux, Michael D. Hunt, Harry Alston Johnson, III, Phelps Dunbar, L.L.P., Baton Rouge, LA, for Defendants–Appellees.

Appeal from the United States District Court for the Middle District of Louisiana.

Before STEWART, Chief Judge, and GARZA and SOUTHWICK, Circuit Judges.

CARL E. STEWART, Chief Judge:

Plaintiff–Appellant challenges the district court's dismissal of its antitrust suit against Defendants–Appellees. Marucci Sports (“Marucci”), a baseball bat manufacturer, filed suit against the National Collegiate Athletic Association (“NCAA”) and the National Federation of State High School Associations (“NFHS”) alleging that the NCAA and NFHS imposed a regulation that restrains trade in the market for non-wood baseball bats in violation of the Sherman Act and other state laws. More specifically, Marucci alleged that the Bat–Ball Coefficient of Restitution Standard (“BBCOR Standard”) was designed to protect the NCAA's interest in receiving sponsorship money from larger bat manufacturers such as Rawlings, Easton, DeMarini, and Louisville Slugger (“Incumbent Manufacturers”) and exclude new market entrants like Marucci. The NCAA and NFHS moved to dismiss the complaint and the district court granted their motions.¹ Marucci appeals the dismissal of its Sherman Act claim and the denial of its motion to amend its Second Amended Complaint.²

I. FACTUAL AND PROCEDURAL BACKGROUND

Marucci is a fairly new baseball bat manufacturer located in Baton Rouge, Louisiana. The NCAA and NFHS are unincorporated associations that regulate the organized athletic activities of their member institutions—colleges and universities and public/private high schools, respectively. In 2011, the NCAA and NFHS implemented the BBCOR Standard to regulate the performance of non-wood baseball bats used in high school and collegiate baseball games. The BBCOR Standard is a measurement of how “hot” a bat is, or in other words, how fast a ball comes off the bat on contact. The higher the score, the “hotter” the bat. According to the NCAA, the purpose of the BBCOR Standard is to ensure that aluminum and composite bats perform like wood bats in an effort to enhance player safety and reduce technology-driven homeruns and other big hits.

WSU conducts all BBCOR certification testing. The testing procedure involves firing a baseball at a subject bat and measuring, inter alia, the ball's speed as it leaves the bat. The measurements are used to generate a BBCOR value. Bats with a BBCOR value of 0.500 or less are certified for use in NCAA and NFHS-governed baseball games. The BBCOR protocol includes an audit provision that allows for periodic testing of previously certified bat models. A bat model may be decertified if three different bats of the same length and weight combination have failed compliance testing. The BBCOR protocol allows bat manufacturers to observe compliance testing and to appeal a finding that a certain bat is non-compliant. Between 2010 and 2011, Marucci had several aluminum bat models certified as compliant with the BBCOR Standard. In early 2012, four of Marucci's bats failed compliance testing because their BBCOR value exceeded 0.500. In April 2012, WSU retested Marucci's decertified bats and they failed again. Marucci appealed WSU's findings to the NCAA Baseball Rules Committee and the decision to decertify the bats was affirmed.

On April 18, 2012, Marucci filed suit against the NCAA, NFHS, and WSU. In May 2012, the NCAA, NFHS, and WSU filed separate motions to dismiss Marucci's complaint. In lieu of responding to the motions to dismiss, Marucci filed its First Amended Complaint on May 15, 2012. Defendants then moved to dismiss the First Amended Complaint. Marucci responded to the motions to dismiss and also filed its Second Amended Complaint. The NCAA and NFHS then moved to dismiss the Second Amended Complaint. On March 8, 2013, Marucci filed a motion to amend its Second Amended Complaint and attached a copy of its proposed Third Supplemental & Amending Complaint (“Third Amended Complaint”). ³ On March 25, 2013, the district court granted Defendants' motions to dismiss the Second Amended Complaint. The district court also denied Marucci's motion to amend its Second Amended Complaint.

On appeal, Marucci claims that the district court erred in dismissing its Sherman Act claim and abused its discretion by denying Marucci's motion to amend its Second Amended Complaint.

II. DISCUSSION

A. Marucci's Sherman Act Claim

1. Standard of Review

“We review a district court's ruling on a motion to dismiss de novo.” Wampler v. Sw. Bell Tel. Co., 597 F.3d 741, 744 (5th Cir.2010) (citation omitted). In order to survive a motion to dismiss, the pleader must submit a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Antitrust claims do not necessitate a higher pleading standard and a plaintiff “need only plead ‘enough facts to state a claim to relief that is plausible on its face.’ ” Wampler, 597 F.3d at 744 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

2. Applicable Law

15 U.S.C. § 1 (“the Sherman Act”) prohibits all agreements that restrain trade. See Ariz. v. Maricopa Cnty. Med. Soc'y, 457 U.S. 332, 342, 102 S.Ct. 2466, 73 L.Ed.2d 48 (1982). To establish a violation of § 1 of the Sherman Act, Marucci must demonstrate that: “(1) [the NCAA and NFHS] engaged in a conspiracy, (2) the conspiracy had the effect of restraining trade, and (3) trade was restrained in the relevant market.” Apani Sw., Inc. v. Coca–Cola Enters., Inc., 300 F.3d 620, 627 (5th Cir.2002).

To satisfy the conspiracy element of a Sherman Act claim, Marucci must show “that the defendants engaged in concertedaction, defined as having ‘a conscious commitment to a common scheme designed to achieve an unlawful objective.’ ” Golden Bridge Tech., Inc. v. Motorola, Inc., 547 F.3d 266, 271 (5th Cir.2008) (quoting Monsanto Co. v. Spray–Rite Serv. Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984)). “Once a plaintiff establishes that a conspiracy occurred, whether it violates § 1 is determined by the application of either the per se rule or the rule of reason.” Id. (citation omitted). “[T]he per se rule is appropriate only after courts have had considerable experience with the type of restraint at issue and only if courts can predict with confidence that it would be invalidated in all or almost all instances under the rule of reason.” Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 886–87, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007) (“Leegin I ”) (citations omitted). Moreover, the per se rule should only be applied when “conduct [is] so pernicious and devoid of redeeming virtue that it is condemned without inquiry into the effect on the market in the particular case at hand.” Spectators' Commc'n Network Inc. v. Colonial Country Club, 253 F.3d 215, 223 (5th Cir.2001) (citation omitted).

Under a rule of reason analysis, the factfinder considers all of the circumstances to determine whether a restrictive practice imposes an unreasonable restraint on competition. Maricopa Cnty. Med. Soc'y, 457 U.S. at 343. The court's considerations should include the restrictive practice's “history, nature, and effect” and “[w]hether the businesses involved have market power.” Leegin I, 551 U.S. at 885–86, 127 S.Ct. 2705 (citation and internal quotation marks omitted). Market power has been defined as “the ability to raise prices above those that would be charged in a competitive market.” Nat'l Collegiate Athletic Ass'n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 109 n. 38, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984) (citations omitted). The rule of reason analysis also requires that the plaintiff show that the defendants' activities injured competition. PSKS, Inc. v. Leegin Creative Leather Prods., 615 F.3d 412, 417 (5th Cir.2010) (“Leegin II ”). The rule of reason is designed to help courts differentiate between “restraints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer's best interest.” Leegin I, 551 U.S. at 886, 127 S.Ct. 2705. Regardless of which rule applies, the court's inquiry should ultimately focus upon “form[ing] a judgment about the competitive significance of the restraint.” Bd. of Regents, 468 U.S. at 103, 104 S.Ct. 2948 (citation and internal quotation marks omitted).

In Board of Regents, the Supreme Court explained that “it is reasonable to assume that most of the regulatory controls of the NCAA are justifiable means of fostering competition among amateur athletic teams and therefore procompetitive....” Id. at 117, 104 S.Ct. 2948. The Court distinguished between the restraints at issue in that case—limitations on football telecasts—and “rules defining the conditions of the contest, the eligibility of participants, or the manner in which members of a joint enterprise shall share the responsibilities and the benefits of the total venture.” Id. The latter are presumptively procompetitive and are not generally deemed unlawful restraints on trade. See id.

3. Analysis

a. Conspiracy

We must first decide whether the Second Amended Complaint sufficiently alleges that the NCAA and NFHS...