National Basketball Ass'n v. Williams

Decision Date24 January 1995
Docket NumberNo. 761,D,761
Citation45 F.3d 684
Parties148 L.R.R.M. (BNA) 2368, 63 USLW 2511, 129 Lab.Cas. P 11,276, 1995-1 Trade Cases P 70,888 NATIONAL BASKETBALL ASSOCIATION; Atlanta Hawks, L.P.; Capital Bullets Basketball Club, Inc.; Boston Celtics Limited Partnership; Charlotte NBA Limited Partnership; Dallas Basketball Limited; Denver Nuggets Limited Partnership; Detroit Pistons Basketball Company; Golden State Warriors; Rocket Ball, Ltd.; Jazz Basketball Investors, Inc.; LAC Basketball Club, Inc.; Los Angeles Lakers, Inc.; Madison Square Garden Corporation; Meadowlands Basketball Associates; Miami Heat Limited Partnership; Milwaukee Bucks, Inc.; Minnesota Professional Basketball Limited Partnership; Orlando Magic, Ltd.; Pacers Basketball Corporation; Philadelphia 76ers Basketball Club, Inc.; Phoenix Suns Limited Partnership, L.P.; Sacramento Kings Limited Partnership, L.P.; San Antonio Spurs, Ltd.; Ackerley Communications, Inc.; Trail Blazers Inc. and Gund Business Enterprises, Inc., Plaintiffs-Counterclaim-Defendants-Appellees, Chicago Professional Sports Limited Partnership, Counterclaim-Defendant-Appellee, v. Charles L. WILLIAMS; Charles D. Smith; Daniel R. Manning; Rolando A. Blackman; Mark E. Eaton; Lafayette Lever; Herbert L. Williams; James A. Jackson; Dikembe Mutombo; Glenn A. Rivers; David M. Robinson; Reggie Williams; Eric Anderson; Marty Conlon; Christian Laettner; Adrian Autry and Shawnelle Scott, on behalf of themselves and all persons similarly situated, Defendants-Counterclaim-Plaintiffs-Appellants, Eric Mobley and Trevor Ruffin, Defendants-Appellants, Dominique Wilkins; Horace Grant; Brian Shaw; Dale Davis; Terrell Brandon; Donyell Marshall and National Basketball Players Association, Counterclaim-Plaintiffs-Appellants. ocket 94-7709.
CourtU.S. Court of Appeals — Second Circuit

Frederick A.O. Schwarz, Jr., New York City (Robert S. Rifkind, Rowan D. Wilson, Michelle K. Jacobs, Sara M. Darehshori, Cravath, Swaine & Moore, New York City; George H. Cohen, Robert M. Weinberg, Andrew D. Roth, Bredhoff & Kaiser, Washington, DC; Simon P. Gourdine, Ronald Klempner, New York City, of counsel), for appellants.

Jeffrey A. Mishkin, New York City (Howard L. Ganz, Steven C. Krane, Wendy H. Schwartz, Douglas L. Perlman, Proskauer Rose Goetz & Mendelsohn; Frank Rothman, Shepard Goldfein, William L. Daly, Skadden Arps Slate Meagher & Flom; Richard W. Buchanan, of counsel), for appellees.

Joel G. Chefitz (Stephen D. Libowsky, Robert K. Niewijk, Katten Muchin & Zavis, Chicago, IL; John N. Romans, Katten Muchin & Zavis, New York City, of counsel), for counterclaim-defendant-appellee Chicago Professional Sports Ltd. Partnership.

Before: WINTER, PRATT, and CALABRESI, Circuit Judges.

WINTER, Circuit Judge:

Appellants, who are professional basketball players and their union, appeal Judge Duffy's dismissal of their counterclaim and grant of declaratory relief to the National Basketball Association (the "NBA") and its member teams (collectively, the "NBA Teams"). Judge Duffy held that: (i) the antitrust laws have no application to the collective bargaining negotiations between appellants and the NBA Teams; and (ii) even if the antitrust laws apply, the "College Draft," "Right of First Refusal," and "Revenue Sharing/Salary Cap System" survive scrutiny under the Rule of Reason. We affirm on the first ground.


The NBA is comprised of 27 member teams, each of which is an appellee on this appeal. Appellants are a class of present and future players on NBA member teams, and the National Basketball Players Association, the exclusive bargaining representative of all players presently on the roster of NBA Teams (collectively the "Players").

For nearly 30 years, the NBA Teams have bargained as a multiemployer bargaining The College Draft is the process by which exclusive rights to negotiate with eligible college players are apportioned among the NBA Teams. In general, the College Draft allows teams with the worst records to select earlier than teams with better records. The NBA Teams select 54 players in the Draft. A player who is drafted by a particular team may negotiate only with that team. A player who is not drafted may negotiate with any NBA team.

unit with the Players Association. Since October 1967, the NBA and the Players Association have entered into ten successive collective bargaining agreements ("CBAs"). The most recent CBA went into effect on November 1, 1988 (the "1988 CBA"), and expired on June 23, 1994, the day following the last playoff game of the 1993-94 NBA season. During negotiations over a new CBA in April and May 1994, the Players demanded the elimination of three provisions contained in the 1988 CBA: the "College Draft," the "Right of First Refusal," and the "Revenue Sharing/Salary Cap System."

The Right of First Refusal permits a team to match any offer made to one of its current players by another team and thus to retain the player's services. The Right of First Refusal applies only to Restricted Free Agents--players who have either completed fewer than two contracts or have fewer than four years of experience in the NBA.

The Revenue Sharing/Salary Cap System establishes an overall wage framework that provides that: (i) total player salaries and benefits paid by all NBA Teams will be no less than a specified percentage of revenues; and (ii) the total salary paid to players by each team is subject to both a maximum and a required minimum. The Right of First Refusal and the present version of the College Draft have been incorporated in all the CBAs signed by the parties since 1976; the Revenue Sharing/Salary Cap provision has been included in every CBA since 1983.

On May 4, 1994, the Players refused to negotiate further with the NBA Teams until the 1988 CBA formally expired. On June 17, 1994, the NBA Teams began the instant action in the Southern District of New York, seeking a declaratory judgment against the individual appellants and a class of all present and future NBA players. The NBA Teams sought two principal declarations: (i) that the continued imposition of the disputed provisions of the CBA would not violate the antitrust laws because that imposition is "governed solely by the labor laws and is exempt from antitrust liability under the nonstatutory exemption to the antitrust laws"; and (ii) that the disputed provisions are lawful even if the antitrust laws apply. On June 27, 1994, the Players counterclaimed, asserting that continued imposition by the NBA Teams of the College Draft, Right of First Refusal, and Revenue Sharing/Salary Cap System violated the Sherman Act because they were no longer embodied in an unexpired CBA. They sought a temporary restraining order and preliminary injunction barring the NBA Teams from entering into contracts with players until the case could be decided on the merits. On June 28, 1994, Judge John F. Keenan issued the requested TRO and set a July 8 date for a preliminary injunction hearing.

On July 8, Judge Duffy, to whom the case was assigned, consolidated the preliminary injunction hearing with the trial on the merits pursuant to Fed.R.Civ.P. 65(a)(2). The trial was conducted on July 12, 1994. The Players called nine witnesses--three players, three player agents, the Executive Director of the Players' Association, and two economists. Because Judge Duffy allotted only one day for the trial, the Players proffered their direct testimony largely through affidavits, followed by cross-examination. The NBA Teams called NBA Commissioner David J. Stern as a live witness and introduced the affidavit of Deputy Commissioner Russell T. Granik.

On July 18, Judge Duffy granted the NBA's request for declaratory relief and dismissed the Players' counterclaim. Relying on Powell v. National Football League, 930 F.2d 1293, 1304 (8th Cir.1989), cert. denied, 498 U.S. 1040, 111 S.Ct. 711, 112 L.Ed.2d 700 (1991), Judge Duffy concluded that the nonstatutory labor exemption from the antitrust laws applied, and that "[a]ntitrust immunity exists as long as a collective bargaining relationship exists." Accordingly, he held that Judge Duffy further held that, even if the NBA Teams have no antitrust immunity, the Players had nevertheless failed to show that the provisions in question are "unreasonably anti-competitive." In so concluding, he relied upon the benefits of competitive athletic balance that he found are promoted by those provisions. He thus held that the disputed provisions do not violate the antitrust laws even if the nonstatutory labor exemption does not apply.

the NBA was entitled to a declaration that the continued imposition of the College Draft, Right of First Refusal, and Revenue Sharing/Salary Cap provisions does not violate the antitrust laws so long as there is a collective bargaining relationship between the NBA and the Players' Association.

The Players appealed.

A. The Players' Antitrust Claim and the NBA Teams' Defense

The gravamen of the Players' claim is not that the College Draft, Right of First Refusal, or Revenue Sharing/Salary Cap System result in a restraint on competition unique to those provisions (although they discuss the restrictiveness of those particular provisions with regard to the Rule of Reason issue). Rather, the vice on which their claim relies is that the NBA Teams have agreed jointly to impose these provisions as terms and conditions of employment pending agreement on a new CBA. Their "main point" is that "these are naked restraints between competitors; they prevent competition; they fix prices; they suppress salaries." Appellants' Brief at 11. At oral argument, counsel for the Players stated that the "underlying offense" is that "horizontal competitors for labor have entered into what is essentially a price-fixing agreement." Although the Players concede that employers may act jointly with regard to terms of employment where a particular union agrees to those...

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