Powell v. National Football League

• Decision Date: 29 January 1988
• Docket Number: Civ. No. 4-87-917.
• Citation: 678 F. Supp. 777
• Parties: Marvin POWELL, Brian Holloway, Michael Kenn, Michael Davis, James Lofton, Michael Luckhurst, Dan Marino, George Martin, Steve Jordan and the National Football League Players Association on behalf of themselves and all class members, Plaintiffs, v. NATIONAL FOOTBALL LEAGUE, et al., Defendants.
• Court: U.S. District Court — District of Minnesota

678 F. Supp. 777

Marvin POWELL, Brian Holloway, Michael Kenn, Michael Davis, James Lofton, Michael Luckhurst, Dan Marino, George Martin, Steve Jordan and the National Football League Players Association on behalf of themselves and all class members, Plaintiffs, v. NATIONAL FOOTBALL LEAGUE, et al., Defendants.

Civ. No. 4-87-917.

United States District Court, D. Minnesota, Fourth Division.

January 29, 1988.

Edward M. Glennon, Carol T. Rieger, J. Michael Dady, Luke H. Terhaar and Lindquist & Vennum, Minneapolis, Minn., for plaintiffs.

Laura Besvinick, Bruce W. Greer and Greer, Homer, Cope & Bonner, Miami, Fla., for plaintiff-intervenor.

Paul J. Tagliabue, John H. Schafer, Herbert Dym, Lyle Jeffrey Pash and Covington & Burling, Washington, D.C., for defendants.

MEMORANDUM AND OPINION

DOTY, District Judge.

Plaintiffs in this action are the National Football League Players Association ("NFLPA") and several professional football players who play for various clubs in the National Football League ("NFL"). On October 15, 1987, plaintiffs commenced this lawsuit against the NFL and its member organizations pursuant to sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, to enjoin and otherwise redress alleged violations of the Sherman Antitrust Act, 15 U.S.C. § 1 et seq.

The case is now before the Court on plaintiffs' motions for partial summary judgment and for a preliminary injunction, and on defendants' cross-motion for summary judgment. Specifically, plaintiffs request partial summary judgment declaring that the NFL defendants have wilfully acquired or maintained monopoly power in the market for major league professional football in the United States. Plaintiffs also seek to enjoin defendants from implementing or continuing a system of alleged player restraints known as the Right of First Refusal/Compensation system and the NFL Players Contract (referred to collectively as the "player restraints").¹ Defendants' cross-motion seeks summary judgment declaring that the challenged restraints are insulated from antitrust scrutiny by operation of the nonstatutory labor exemption to the antitrust laws.

FACTUAL BACKGROUND

The restraints which are the subject of this motion are the Right of First Refusal/Compensation system and the NFL Player Contract. Plaintiffs allege that since the League's inception, defendants have continuously imposed these and other anti-competitive player restraints in order to depress player salaries and restrict player movement among the NFL clubs.

NFL Player Contract²

Since at least the early 1950's, defendants have required all NFL players to sign a standardized contract, essentially uniform in all respects except for compensation and duration, as a condition to becoming or remaining employed in the NFL. The standard form utilized by the NFL defendants from the early 1950's through approximately 1976 was known as the "Standard Player Contract." The NFL defendants changed the standard form contract in 1976 and implemented a form contract known as the "NFL Player Contract," which has remained unchanged from 1977 to date. Plaintiffs allege that the NFL Player Contract contains many restrictive provisions including, among other things, a requirement that the player abide by various rules and regulations unilaterally adopted by the NFL. These rules and regulations include the so-called "waiver system" through which players allegedly are denied free agency in the event of their discharge by the club for which they are playing unless and until all 28 NFL clubs sequentially "waive" their self-conferred rights to employ the player under the terms of the player's existing contract. The player must accept the terms of the standardized contract or he may not play football. Plaintiffs contend that the NFL Player Contract violates the antitrust laws.

Right of First Refusal/Compensation System

Under the Right of First Refusal/Compensation system, every NFL club retains rights to "its players" even though, in the case of veteran free agents, contractual rights to a player no longer exist. When a veteran player's contract has expired and a competing NFL club makes an offer to that player, the player's old team may keep the player simply by matching the competing offer; the player's old club therefore is said to have a "right of first refusal" as to the player's services. If the competing offer is large enough, and the club to which the player was previously under contract does not choose to match a competing offer, the old club will receive draft choice "compensation" which may be extremely costly to the acquiring club. Plaintiffs allege that in addition to restraining player movement, this system has effectively eliminated competition among NFL clubs for player services.

The current Right of First Refusal/Compensation system, though substantially modified, finds its source in the old "Rozelle Rule."³ The Rozelle Rule was imposed upon the players by the NFL defendants from 1963 until 1976 when the Eighth Circuit held that the rule as implemented contravened the antitrust Rule of Reason and thus constituted an unreasonable restraint of trade in violation of Section 1 of the Sherman Act. Mackey v. National Football League, 543 F.2d 606 (8th Cir. 1976), cert. dismissed, 434 U.S. 801, 98 S.Ct. 28, 54 L.Ed.2d 59 (1977). In holding that the Rozelle Rule violated the antitrust laws under a Rule of Reason analysis,⁴ the Eighth Circuit stated:

In defining the restraint on competition for players' services, the district court found that the Rozelle Rule significantly deterred clubs from negotiating with and signing free agents; that it acts as a substantial deterrent to players playing out their options and becoming free agents; that it significantly decreases players' bargaining power in contract negotiations; that players are thus denied the right to sell their services in a free and open market; that as a result, the salaries paid by each club are lower than if competitive bidding were allowed to prevail; and that absent the Rozelle Rule, there would be increased movement in interstate commerce of players from one club to another. We find substantial evidence in the record to support these findings.

543 F.2d at 620.

From March 1, 1977 through July 15, 1982, a revised system of free agency existed in the NFL. The new Right of First Refusal/Compensation system was developed jointly by the NFLPA and the NFL Management Council in negotiations in 1976-1977 that led to the 1977 Collective Bargaining Agreement. The 1977 agreement was incorporated in a class action settlement, approved by the district court, that brought to an end five years of labor-management strife in the NFL. See Alexander v. National Football League, 1977-2 Trade Cas. (CCH) par. 61,730 (D.Minn.1977), Available on WESTLAW, 1977 WL 1497, aff'd sub nom., Reynolds v. National Football League, 584 F.2d 280 (8th Cir.1978). In approving the settlement, the district court found that the 1977 bargaining agreement fundamentally modified traditional NFL player practices, eliminating "many of the problems which caused players to desire movement from one team to another." Alexander, 1977-2 Trade Cas. at par. 72,997, Findings par. 3.27. The district court further noted that the "revised compensation rule has been the subject of serious arm's-length collective bargaining and is the product of good faith collective bargaining between the NFLPA and the NFL Management Council." Id. at par. 73,000, Findings par. 3.52. In affirming the decision of the district court, the Eighth Circuit stated that it was a "near certainty" that the Agreement was the product of good faith collective bargaining and would be found exempt if that issue were presented to the Court. Reynolds v. National Football League, 584 F.2d at 288.

Notwithstanding the significant liberalization of the traditional free agency system, during the 5-year period covered by the 1977 Collective Bargaining Agreement, fewer than 50 out of 600 players received offers from other NFL clubs after becoming free agents. Plaintiffs allege that the only time players moved was when, in effect, a trade was arranged between two NFL clubs. That practice occurred on fewer than 20 occasions and only one player actually moved from one NFL club to another in a transaction in which draft choice compensation was payable.

The Right of First Refusal/Compensation system was again implemented in the 1982 Collective Bargaining Agreement. The 1982 Agreement, executed on December 11, 1982, by the NFLPA and the NFL Management Council, came at the conclusion of a 57-day strike by the NFL players. The total package of employee benefits won by the union was substantial, with financial commitments by the NFL clubs exceeding $1.2 billion over the five seasons covered by the Agreement. The 1982 Agreement also modified the Right of First Refusal/Compensation system. Most significantly, the 1982 Agreement increased the salary levels at which draft choice compensation would be triggered. For example, the salary level at which a third-round draft choice would have to be paid for a veteran free agent entering his fourth NFL season increased from $55,000 in 1981 to $90,000 in 1983.

The 1982 Collective Bargaining Agreement expired on August 31, 1987.⁵ The modifications incorporated in the Agreement did not increase player movement in the NFL and, in fact, during the 5-year period covered by the Agreement, not a single veteran player moved from one NFL club to another under the Right of First Refusal/Compensation system.⁶ Negotiations both during and after expiration of the Agreement failed to produce an accord regarding the free agency system, and on September 22, 1987, the members of the NFLPA went on strike. Twenty-four days later, on October 15, 1987, the NFLPA ended the strike after the parties once again failed to reach a compromise on the free agency issue.

On February 1, 1988 the contracts of at least 450 veteran...