National Basketball Ass'n v. SDC Basketball Club, Inc.

• Decision Date: 21 April 1987
• Docket Number: No. 86-5891,86-5891
• Citation: 815 F.2d 562
• Parties: , 1987-1 Trade Cases 67,543 NATIONAL BASKETBALL ASSOCIATION, et al., Plaintiff-Counterdefendants- Counterclaimants-Appellants, v. SDC BASKETBALL CLUB, INC. and Los Angeles Memorial Coliseum Commission, Defendants-Counterclaimant- Counterdefendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 562

815 F.2d 562

55 USLW 2626, 1987-1 Trade Cases 67,543

NATIONAL BASKETBALL ASSOCIATION, et al., Plaintiff-Counterdefendants- Counterclaimants-Appellants, v. SDC BASKETBALL CLUB, INC. and Los Angeles Memorial Coliseum

Commission,

Defendants-Counterclaimant-

Counterdefendants-Appellees.

No. 86-5891.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 4, 1987.

Decided April 21, 1987.

Michael A. Cardozo, New York City, for plaintiff-counterclaimants-counterdefendants-appellants.

Christopher Layne and Maxwell M. Blecher, Los Angeles, Cal., Wayne M. Liao and Michael I. Spiegel, San Francisco, Cal., for defendants-counterclaimants-counterdefendants-appellees.

Appeal from the United States District Court for the Southern District of California.

Before FERGUSON, NELSON and BEEZER, Circuit Judges.

FERGUSON, Circuit Judge:

Once again this court must consider the application of federal antitrust law to a sports league's effort to restrain the movement of a member franchise. In this case, the league, the National Basketball Association (NBA), seeks declaratory judgment that it may restrain the movement of its franchise, the Los Angeles Clippers (nee San Diego Clippers), and that it may impose a charge upon them for the Clippers' unilateral usurpation of the "franchise opportunity" available in the Los Angeles market. The NBA also seeks declaratory

judgment on similar grounds against the Los Angeles Memorial Coliseum Commission (the Coliseum). The district court, believing the result controlled by the decision in the first Los Angeles Raiders case, ¹ dismissed the case upon the Clippers' motion for summary judgment. Finding genuine issues of material fact, we reverse and remand to the district court for further proceedings.

I.

The Clippers currently operate a professional basketball franchise in the Los Angeles Sports Arena. The franchise is a member of the NBA, an organization of professional basketball teams that operates as a joint venture under New York law. In the early 1980s, the then San Diego Clippers desired to move their franchise to Los Angeles. The Clippers abandoned their effort after the NBA filed suit in the Southern District of California. The suit was resolved via a stipulation that any subsequent suits regarding a move must be brought in the Southern District.

In 1984, this court rendered the decision in Raiders I. The Raiders I panel found that the National Football League (NFL) was not immune from the antitrust laws as a single business entity. 726 F.2d at 1387-90. Possible antitrust violations within the league thus properly are tested by "rule of reason" antitrust analysis. The Raiders I panel found that a reasonable jury applying the rule of reason standard could have found that the NFL violated antitrust laws in restraining Al Davis's Oakland Raiders from moving to the Los Angeles Coliseum. Id. at 1390-98.

The then extant clause directly governing the movement of franchises within the NBA, Article 9 of the NBA constitution, was similar to a clause abandoned by the NFL prior to the Raiders' litigation as potentially violative of federal antitrust laws. See Raiders I, 726 F.2d at 1385 & n. 1. Seeing the Raiders I decision as a window of opportunity, the Clippers, through their president Alan Rothenberg, on May 14, 1984, announced to the NBA their move to Los Angeles. They asserted that the move was to take place on the following day and that any action taken by the NBA to restrain that move would violate the antitrust laws. The NBA attempted to appoint an investigatory committee to examine the move, but abandoned the effort in the face of the Clippers' continued assertions that the investigation violated antitrust law. To avoid potential liability, the NBA scheduled the Clippers' games in Los Angeles and made no effort to sanction the club.

The NBA asserts that Article 9 was not the only limitation upon franchise movement. Article 9 provided that no team could move into a territory operated by another franchise without that franchise's approval. The Clippers complied with this requirement, as the Los Angeles Lakers agreed in writing to waive their rights under Article 9. The NBA argues, however, that the league as a body must be permitted to consider moves in order to give effect to a number of constitutional provisions for the exclusiveness of franchise territories. Article 9, it contends, limits the actions of the NBA as a league and does not prescribe the only strictures on franchise movement.

The NBA also began proceedings to adopt a new rule governing the consideration of franchise moves, later adopted as Article 9A. The NBA argues that Article 9A is a new constitutional provision codifying previous practice. The Clippers argue that Article 9A is rather an amendment to Article 9 that, by virtue of the NBA constitution, must be unanimously approved by the member teams. The Clippers thus argue that Article 9A was not properly adopted at the time of the Clippers' move, when the Clippers voted against it.

The NBA brought suit in the Southern District for declaratory judgment that it could as a league consider the Clippers' After voluminous pleading and the denial of five summary judgment motions, the district judge suggested on the eve of trial that the NBA could not possibly win its case under the guidelines established in Raiders I. The judge further expressed doubt that the league had any valid provision for the consideration of franchise movement. At the hearing on the final summary judgment motions, he repeated his continuing frustration with the case by noting that he couldn't "see spending my time ... on this case without some instruction from the circuit." The district judge also refused NBA counsel's request for a written opinion.

move to Los Angeles and sanction the Clippers for failing to seek league approval without violating the antitrust laws. It also sought damages from the Clippers on a variety of state-law claims, including breach of fiduciary duty and breach of contract. The NBA sought damages from the Coliseum for tortious interference with the contractual relations between the Clippers and the NBA. The Clippers and the Coliseum responded and counterclaimed against the NBA and individually against its member teams for declaratory judgment that consideration by the NBA of the Clippers' move would violate the antitrust laws.

The district judge entered an order granting summary judgment for the Clippers on April 28, 1986. The order awarded the Clippers and the Coliseum declaratory relief but not damages on their antitrust claims. The order dismissed all of the NBA's claims. Although it is not entirely clear, the district court appears to have dismissed the antitrust claims as non-meritorious, and the pendent state claims due to the dismissal of the primary federal claim. The Clippers' and Coliseum's other counterclaims were dismissed by stipulation, and thus the judgment is final for appeal.

After the district court granted summary judgment, the Raiders panel rendered its opinion regarding damages and state-law claims. Resting on that decision's award in offset for the "expansion opportunity" lost to the league by the Raiders' move, see Raiders II, 791 F.2d at 1371-73, the NBA requests that this court enter judgment in its favor for the expansion opportunity taken by the Clippers in their move to Los Angeles. The NBA also requests summary judgment on its pendent claims for declaratory relief regarding the effect of the NBA constitution. The NBA further requests that summary judgment on all other counts be reversed and the case remanded for trial.

II.

A district court's grant of summary judgment and its determinations of state and federal law are reviewed de novo. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors' Ass'n, 809 F.2d 626, 629-30 (9th Cir.1987). In "reviewing a grant of summary judgment, this court sits in the same position as the district court and applies the same summary judgment test that governs the district court's decision." Id. at 630.

III.

A.

Both the Coliseum and the Clippers contend that there is no "actual controversy" to allow federal jurisdiction over the NBA's request for declaratory judgment. They claim that since the NBA has taken no affirmative action to sanction the Clippers or deny them scheduling rights in Los Angeles, the issues of the case are not sufficiently refined to allow federal jurisdiction.

Declaratory judgment actions are justiciable if "there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826 (1941). Both defendants rely on Hendrix v. Poonai, 662 F.2d 719 (11th Cir.1981) (per curiam), to illustrate a lack of substantial controversy. In Hendrix, a hospital sought a declaration that its refusal to hire a doctor would not violate the antitrust laws. The hospital had not yet refused to hire the doctor. The Eleventh Circuit Whatever the merits of Hendrix, ² the nature of the relief sought by the NBA is not so speculative. The NBA seeks, in essence, a declaratory judgment holding that it may evaluate and assess limits on franchise movement without violating the antitrust laws. What it seems to assert, albeit somewhat obliquely, is that absent any contractual or antitrust bars, it would have assessed a charge to the Clippers to account for the league's loss of interest in the Los Angeles market. It seeks a declaratory judgment assessing a value of such a charge that is not a restraint in violation of the antitrust laws. The defendants have been in direct conflict with the NBA on all of these issues. They have asserted from the onset of the suit that even the consideration by the NBA of a charge upon the move would violate the antitrust laws.

                found that no jurisdiction existed

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