Mucky Duck v. Directv, LLC (In re Nat'l Football League's Sunday Ticket Antitrust Litig.)

• Decision Date: 13 August 2019
• Docket Number: No. 17-56119,17-56119
• Citation: 933 F.3d 1136
• Parties: IN RE NATIONAL FOOTBALL LEAGUE’S SUNDAY TICKET ANTITRUST LITIGATION, Ninth Inning, Inc., dba The Mucky Duck; 1465 Third Avenue Restaurant Corp., dba Gael Pub ; Robert Gary Lippincott, Jr.; Michael Holinko, an individual, for himself and all others similarly situated, Plaintiffs-Appellants, v. DirecTV, LLC; DirecTV Holdings, LLC; National Football League, Inc.; NFL Enterprises, LLC; Arizona Cardinals, Inc.; Atlanta Falcons Football Club LLC ; Baltimore Ravens, LP; Buffalo Bills, Inc.; Panthers Football, LLC ; Chicago Bears Football Club, Inc.; Cincinnati Bengals, Inc.; Cleveland Browns, LLC; Dallas Cowboys Football Club, Ltd.; Detroit Lions, Inc.; Green Bay Packers, Inc.; Houston NFL Holdings, LP; Indianapolis Colts, Inc.; Jacksonville Jaguars, Ltd.; Kansas City Chiefs Football Club, Inc.; Miami Dolphins, Ltd. ; Minnesota Vikings Football Club, LLC ; New England Patriots, LP ; New Orleans Louisiana Saints, LLC; New York Football Giants, Inc.; New York Jets Football Club, Inc.; Oakland Raiders, LP ; Philadelphia Eagles Football Club, Inc. ; Pittsburgh Steelers Sports, Inc.; San Diego Chargers Football Co.; San Francisco Forty Niners, Ltd.; the Rams Football Company, LLC; Buccaneers, LP; Tennessee Football, Inc.; Washington Football, Inc.; Football Northwest LLC; Denver Broncos Football Club, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

933 F.3d 1136

IN RE NATIONAL FOOTBALL LEAGUE’S SUNDAY TICKET ANTITRUST LITIGATION,

Ninth Inning, Inc., dba The Mucky Duck; 1465 Third Avenue Restaurant Corp., dba Gael Pub ; Robert Gary Lippincott, Jr.; Michael Holinko, an individual, for himself and all others similarly situated, Plaintiffs-Appellants,

v.DirecTV, LLC; DirecTV Holdings, LLC; National Football League, Inc.; NFL Enterprises, LLC; Arizona Cardinals, Inc.; Atlanta Falcons Football Club LLC ; Baltimore Ravens, LP; Buffalo Bills, Inc.; Panthers Football, LLC ; Chicago Bears Football Club, Inc.; Cincinnati Bengals, Inc.; Cleveland Browns, LLC; Dallas Cowboys Football Club, Ltd.; Detroit Lions, Inc.; Green Bay Packers, Inc.; Houston NFL Holdings, LP; Indianapolis Colts, Inc.; Jacksonville Jaguars, Ltd.; Kansas City Chiefs Football Club, Inc.; Miami Dolphins, Ltd. ; Minnesota Vikings Football Club, LLC ; New England Patriots, LP ; New Orleans Louisiana Saints, LLC; New York Football Giants, Inc.; New York Jets Football Club, Inc.; Oakland Raiders, LP ; Philadelphia Eagles Football Club, Inc. ; Pittsburgh Steelers Sports, Inc.; San Diego Chargers Football Co.; San Francisco Forty Niners, Ltd.; the Rams Football Company, LLC; Buccaneers, LP; Tennessee Football, Inc.; Washington Football, Inc.; Football Northwest LLC; Denver Broncos Football Club, Defendants-Appellees.

No. 17-56119

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 7, 2018 Pasadena, California

Filed August 13, 2019

IKUTA, Circuit Judge:

Every Sunday during football season, millions of National Football League (NFL) fans tune in to watch their team play.If they live in the same area as their favorite team—such as Los Angeles Rams fans who live in Los Angeles—they can tune into their local Fox or CBS station to enjoy their team’s game on free, over-the-air television.But if NFL fans happen to live far away from their favorite team—such as Seattle Seahawks fans residing in Los Angeles—they can watch every Seahawks game only if they purchase DirecTV’s NFL Sunday Ticket, a bundled package of all NFL games available exclusively to subscribers of DirecTV’s satellite television service.

The plaintiffs, a putative class of Sunday Ticket subscribers, claim that this arrangement harms NFL fans because it eliminates competition in the market for live telecasts of NFL games.Without this arrangement restricting the televising of NFL games, plaintiffs argue, the individual teams would create multiple telecasts of each game and would compete against one another by distributing telecasts of their games through various cable, satellite, and internet channels.We conclude that at this preliminary stage, plaintiffs have stated a cause of action for a violation of Sections 1and2 of the Sherman Act that survives a motion to dismiss.We therefore reverse the district court’s decision to the contrary.

I

To analyze the challenged arrangement between the NFL teams, the NFL, and DirecTV, it is necessary to understand the history of television broadcasting of NFL games.The NFL, an association of "separately owned professional football teams," was formed in 1920. Am. Needle, Inc. v. Nat’l Football League , 560 U.S. 183, 187, 130 S.Ct. 2201, 176 L.Ed.2d 947(2010).While the NFL had a rocky first two decades, its teams gradually became successful.SeeU.S. Football League v. Nat’l Football League , 842 F.2d 1335, 1343(2d Cir.1988).Indeed, by 1959, a majority of NFL team owners felt that there was a "growing interest in professional football and the healthier financial condition of the NFL teams."Am. Football League v. Nat’l Football League , 205 F. Supp. 60, 67(D. Md.1962), aff’d , 323 F.2d 124(4th Cir.1963).And as professional football gained popularity, so did the telecasts of its games.

In the 1950s, the right to telecast NFL games was "controlled by individual teams," which independently licensed the telecasts of their games to television networks.U.S. Football League , 842 F.2d at 1346.¹For example, in 1951, the "Dumont network televised five regular season games (twelve by 1954), as well as the championship game each year."Id.Additionally, in the mid-1950s, "the Columbia Broadcasting System (‘CBS’) began broadcasting certain NFL regular season games for $1.8 million per year, and the National Broadcasting Company(‘NBC’) acquired the right to televise the NFL championship game."Id.

Concerned that too much competition between the teams in the market for broadcast rights might drive some teams out of business, the NFL amended its 1951 bylaws to address this issue.In Article X of the bylaws, the NFL required each NFL team to agree to minimize competition by refraining from telecasting its games into another team’s local market whenever that local team was either playing at home or broadcasting its away game in its local territory.²

United States v. Nat’l Football League , 116 F. Supp. 319, 321(E.D. Pa.1953)( NFL I ).

In 1951, the Justice Department brought suit in district court to enjoin enforcement of Article X, alleging that it violated Section 1 of the Sherman Act.Id. at 321.After a bench trial, Judge Grim held that the NFL could restrict the broadcast of distant games into home territories in order to protect attendance for the local team’s game without violating antitrust law.Id. at 325–26.Because "primarily all of NFL revenues were derived from gate receipts," protecting live attendance at NFL games was important to the league’s success.H.R. Rep. No. 93-483at 5(1973), reprinted in1973 U.S.C.C.A.N. 2032, 2035;seeNFL I , 116 F. Supp. at 325.However, the NFL could not restrict teams from broadcasting their games into another team’s local market when that team was playing away games.NFL I , 116 F. Supp. at 326–27.Such a restriction, Judge Grim held, would be an impermissible restraint of trade that violated the Sherman Act.Id. at 327.Judge Grim therefore enjoined the NFL teams from entering into a contract that restricts "the sale of rights for the telecasting of outside games in club’s home territory on a day when the home club is permitting the telecast of its away game in its home territory."Id. at 330.

The NFL did not appeal the 1953 injunction imposed by NFL I , which remained in force until Congress addressed the issue."For a number of years after the 1953 decision, the broadcasting practices of the member clubs of the National Football League stabilized."H.R. Rep. No. 93-483at 4(1973).The individual NFL teams competed against each other on the field and in the market for telecasting rights.Indeed, "[b]y the late 1950s, eleven individual teams had signed contracts with the Columbia Broadcasting System; two teams—Baltimore and Pittsburgh—had signed contracts with the National Broadcasting Company; and one team—Cleveland—had organized its own network."Id.

This changed when the NFL began to face competition from its newly formed rival, the American Football League (AFL).While the NFL was precluded under NFL I from restricting the sale of telecasts, the AFL was not.Id. at 2034.As a result, the AFL "entered into league-wide television contracts,"id. , and pooled its television rights and revenues in a broadcast contract with ABC, U.S. Football League , 842 F.2d at 1346.

In light of this disparity with the AFL, and out of concern "that the league’s competitive balance on the field would eventually be destroyed if teams in major television markets continued to sell their broadcast rights individually," in 1961, the NFL teams also decided "to sell their collective television rights as a single package and to share broadcast revenues equally among all franchises."Id.(quoting the testimony of Commissioner Rozelle).In 1961, the NFL filed a petition with Judge Grim seeking to implement a new television contract between the NFL and CBS.United States v. Nat’l Football League , 196 F. Supp. 445, 447(E.D. Pa.1961)( NFL II ).Under the terms of the NFL-CBS contract, the NFL teams would pool their television rights in the NFL and then the NFL would jointly sell those rights to CBS.Id. at 446–47.Judge Grim denied the petition, holding that the proposed agreement violated the 1953 injunction because if the agreement went into effect, "the member clubs of the League [would] have eliminated competition among themselves in the sale of television rights to their games."Id. at 447.Judge Grim therefore issued a second injunction (the 1961 injunction) enjoining the implementation of the pooled rights contract between NFL and CBS.Id.

Rather than appeal the 1961 injunction, the NFL sought Congressional relief.In response to the NFL’s lobbying, Congress passed the Sports Broadcasting Act (SBA), which "was specifically designed to establish parity between the National Football League and the American Football League."H.R. Rep. No. 93-483at 5(1973).The SBA effectively overruled NFL II , providing:

The antitrust laws, as defined in section 1 of the [Sherman]Act ... shall not apply to any joint agreement by or among persons engaging in or conducting the organized professional team sports of football, baseball, basketball, or hockey, by which any league of clubs participating in professional football, baseball, basketball, or hockey contests sells or otherwise transfers all or any part of the rights of such league’s member clubs in the sponsored telecasting of the games of football, baseball, basketball, or hockey, as the case may be, engaged in or conducted by such clubs.

15 U.S.C. § 1291.Thus, the SBA provides a tailored exemption for "professional team sports" to sell their rights to "sponsored telecasts" through a joint agreement.Id.In passing the SBA, Congress recognized "that agreements among league members to sell television rights in a cooperative fashion could run afoul of the Sherman Act," and that therefore an exemption from Section 1 of the Sherman Act was required.Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Oklahoma , ...