North American Soccer League v. National Football League
| Decision Date | 27 January 1982 |
| Docket Number | Nos. 11,30,D,s. 11 |
| Citation | 670 F.2d 1249 |
| Parties | 1982-1 Trade Cases 64,524 NORTH AMERICAN SOCCER LEAGUE: Orange County Pro Soccer; Chicago World Soccer Inc.; Caribous of Colorado, Inc.; Michigan Soccer, Limited; Houston Professional Soccer Club, Ltd.; Aztec Professional Soccer Club; Memphis Soccer Club, Inc.; Minnesota Soccer, Inc.; Lipton Professional Soccer, Inc.; Cosmos Soccer Club, Inc.; Oakland Stompers, Ltd.; Philadelphia Soccer Associates; Oregon Soccer, Inc.; Blue & Gold, Ltd.; San Diego Professional Soccer Club; San Jose Earthquakes, Limited; Tampa Bay Soccer Club, Inc.; Pro Soccer, Ltd.; Tulsa Roughnecks, Ltd.; Vancouver Professional Soccer Club, Ltd.; and Washington Diplomats Soccer Club, Inc., Plaintiffs-Appellants-Cross-Appellee. v. NATIONAL FOOTBALL LEAGUE: San Francisco 49ers; Oakland Raiders; New England Patriots Football Club, Inc.; Minnesota Vikings Football Club, Inc.; The Five Smiths, Inc.; Baltimore Football, Inc.; Highwood Service, Inc.; Chicago Bears Football Club, Inc.; Cincinnati Bengals, Inc.; Cleveland Browns, Inc.; Dallas Cowboys Football Club, Inc.; Empire Sports, Inc.; The Detroit Lions, Inc.; Green Bay Packers, Inc.; Houston Oilers, Inc.; Los Angeles Rams Football Co.; New Orleans Saints; New York Football Giants, Inc.; New York Jets Football Club, Inc.; Leonard H. Tose, d/b/a Philadelphia Eagles Football Club; Pittsburgh Steelers Sports; Chargers Football Company; Chicago Cardinals Football Club; Pro-Football, Inc.; and Tampa Bay Buccaneers, Inc., Defendants-Appellees-Cross-Appellant. ockets 80-9153, 81-7003. |
| Court | U.S. Court of Appeals — Second Circuit |
Ira M. Millstein, New York City (James W. Quinn, Irwin H. Warren, Jeffrey L. Kessler, Kenneth L. Steinthal, Weil, Gotshal & Manges, New York City, of counsel), for plaintiffs-appellants-cross-appellee.
William E. Willis, New York City (James H. Carter, Howard D. Burnett, James W. Dabney, Sullivan & Cromwell, New York City, of counsel), for defendants-appellees-cross-appellant.
Before LUMBARD, MANSFIELD and VAN GRAAFEILAND, Circuit Judges.
The North American Soccer League (NASL) and certain of its member soccer teams (collectively referred to herein as "the NASL") appeal from a judgment of the Southern District of New York, Charles S. Haight, Jr., Judge, dissolving a preliminary injunction and dismissing a complaint seeking a permanent injunction and treble damages for alleged violations of § 1 of the Sherman Act, 15 U.S.C. § 1, by the defendants, the National Football League ("NFL") and certain of its member football clubs (collectively referred to herein as "the NFL"). The NFL cross appeals from the dismissal of its counterclaim, which sought an injunction barring owners of NASL member teams from cross-ownership of NFL teams. Because the conduct complained of by the NASL-an NFL ban on cross-ownership by NFL members of other major professional sports league teams (the "cross-ownership ban")-violates the rule of reason under § 1 of the Sherman Act, we reverse. We affirm the dismissal of the NFL's counterclaim.
The central question in this case is whether an agreement between members of one league of professional sports teams (NFL) to prohibit its members from making or retaining any capital investment in any member of another league of professional sports teams (in this case NASL) violates the antitrust laws. The answer requires an analysis of the facts and application of governing antitrust principles. Most of the The success of professional football as a business depends on several factors. The ultimate goal is to attract as many people as possible to pay money to attend games between members and to induce advertisers to sponsor TV broadcasts of such games, which results in box-office receipts from sale of tickets and revenues derived from network advertising, all based on public interest in viewing games. If adequate revenues are received, a team will operate at a profit after payment of expenses, including players' salaries, stadium costs, referees, travel, maintenance and the like. Toward this goal there must be a number of separate football teams, each dispersed in a location having local public fans willing to buy tickets to games or view them on TV; a group of highly skilled players on each team who are reasonably well-matched in playing ability with those of other teams; adequate capital to support the teams' operations; uniform rules of competition governing game play; home territory stadia available for the conduct of the games; referees; and an apparatus for the negotiation and sale of network TV and radio broadcast rights and distribution of broadcast revenues among members.
facts are not in dispute. The NFL is an unincorporated joint venture consisting of 28 individually owned separate professional football teams, each operated through a distinct corporation or partnership, which is engaged in the business of providing public entertainment in the form of competitive football games between its member teams. It is the only major league professional football association in the United States. Upon becoming a member of the NFL a team owner receives a non-assignable franchise giving him the exclusive right to operate an NFL professional football team in a designated home city and "home territory," and to play football games in that territory against other NFL members according to a schedule and terms arranged by the NFL. 1 See NFL Constitution and By-laws, §§ 3.4, 4.1, 4.2
To perform these functions some sort of an economic joint venture is essential. No single owner could engage in professional football for profit without at least one other competing team. Separate owners for each team are desirable in order to convince the public of the honesty of the competition. Moreover, to succeed in the marketplace by attracting fans the teams must be close in the caliber of their playing ability. As one commentator puts it
J. Weistart & C. Lowell, The Law of Sports § 5.11, at 757-58 (1979).
Earlier in this century various professional football leagues existed, outstanding of which were the NFL and AFL (American Football League). In 1970 the AFL merged into the NFL, after receiving Congressional approval to avoid violation of antitrust laws that would otherwise occur. 2 Since then the NFL has assumed full responsibility for national promotion of professional football, granting of team franchises, negotiation of network TV contracts for broadcast rights with respect to its members' games, employment of referees, adoption of game rules, scheduling of season games between members leading up to the league championship game known as the Super Bowl, and many other matters pertaining to the national sport. Although specific team profit figures were not introduced at trial, the record is clear that the NFL and most of its members now generally enjoy financial success. The NFL divides pooled TV receipts Although NFL members thus participate jointly in many of the operations conducted by it on their behalf, each member is a separately owned, discrete legal entity which does not share its expenses, capital expenditures or profits with other members. Each also derives separate revenues from certain lesser sources, which are not shared with other members, including revenues from local TV and radio, parking and concessions. A member's gate receipts from its home games varies from those of other members, depending on the size of the home city, the popularity of professional football in the area and competition for spectators offered by other entertainment, including professional soccer. As a result, profits vary from team to team. Indeed as recently as 1978, the last year for which we have records, 2 of the 28 NFL teams suffered losses. In 1977 12 teams experienced losses. 3 Thus, in spite of sharing of some revenues, the financial performance of each team, while related to that of the others, does not, because of the variables in revenues and costs as between member teams, necessarily rise or fall with that of the others. The NFL teams are separate economic entities engaged in a joint venture.
equally among members. Pre-season gate receipts from each game are shared on a 50/50 basis between opposing teams, and regular season gate receipts are divided on the basis of 60% for the home team and 40% for the visiting team.
The National American Soccer League ("NASL") was founded in 1968 upon the merger of two pre-existing soccer leagues. Like the NFL, the NASL is an unincorporated association of professional soccer teams whose members are separately owned and operated, and are financially independent. Its raison d'etre and the needs of its member teams are essentially the same as those of members of other major professional sports leagues, including the NFL. However, professional soccer is not as mature or lucrative as professional football. Just as was the case with NFL member teams a quarter of a century ago, NASL is struggling to achieve wider popularity and with it greater revenues. Consequently, the risk of investing in an NASL team is considerably greater than that of investing in the NFL.
Soccer was not a widely followed or popular sport when the NASL was founded, and several earlier attempts to put together a professional soccer league failed due to lack of fan interest. The NASL has been the most successful soccer league to date. The district court found that since the NASL was organized "professional soccer has experienced substantial and accelerated growth in fan interest, media following, paid attendance, number of franchises and geographic scope...." 505 F.Supp. 659 at 666-67. With...
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