Robertson v. National Basketball Association

• Decision Date: 14 February 1975
• Docket Number: No. 70 Civ. 1526.,70 Civ. 1526.
• Citation: 389 F. Supp. 867
• Parties: Oscar ROBERTSON et al., Plaintiffs, v. NATIONAL BASKETBALL ASSOCIATION, a joint venture, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

389 F. Supp. 867

Oscar ROBERTSON et al., Plaintiffs, v. NATIONAL BASKETBALL ASSOCIATION, a joint venture, et al., Defendants.

No. 70 Civ. 1526.

United States District Court, S. D. New York.

February 14, 1975.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Weil, Gotshal & Manges, by Peter Gruenberger, Ira Millstein, Joel Harris, Mark Jacoby, James Quinn, Robert Weiner, New York City, for plaintiffs.

Proskauer, Rose, Goetz & Mendelsohn by George G. Gallantz, Michael A. Cardozo, David J. Stern, New York City, for defendant NBA.

Spengler, Carlson, Gubar & Churchill by Robert S. Carlson, New York City, Frederick P. Furth, San Francisco, Cal., Meth, Wood, Neff & Cooper by Robert Carey Neff, Newark, N.J., Michael Goldberg, New York City, for defendants ABA.

OPINION

ROBERT L. CARTER, District Judge.

I. History of the Litigation

A. Nature of the Action

This action was instituted in 1970 pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. ?? 15 and 26¹, to recover treble damages, costs and injunctive relief for violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. ?? 1 and 2.² Defendants are the National Basketball Association (NBA) and the American Basketball Association (ABA). All the named plaintiffs, William Bradley, Joseph Caldwell, Archibald Clark, Melvin Counts, John Havlicek, Donald Kojis, Jon McGlocklin, McCoy McLemore, Thomas Meschery, Jeffrey Mullins, Oscar Robertson, Westley Unseld, Richard Van Arsdale and Chester Walker were active players with,³ and the elected player representative of, one of the then 14 clubs of the NBA.⁴ Plaintiffs sue on behalf of themselves, all presently active players, those who were active at the time the action was originally commenced, and future players of the NBA. Jurisdiction is asserted under 28 U.S.C. ?? 1331 and 1337.

B. Background Facts

This litigation began after reports in the spring of 1970 of a proposed merger between the NBA and the ABA. Plaintiffs' amended complaint⁵ charges defendants with conspiring to restrain competition for the services and skills of professional basketball players through such devices as the college draft, the reserve clause in the Uniform Player Contract (the Uniform Contract), the compensation plan attached to the reserve clause, and various boycott and blacklisting techniques. The complaint further alleges that the NBA and the ABA seek to effectuate a non-competition agreement, merger or consolidation.

In May, 1970, this court (Tenney, J.) preliminarily enjoined the defendants from entering into "any merger, consolidation, or acquisition or combination by any means," except that defendants were permitted to negotiate a proposed merger for the sole purpose of petitioning Congress for antitrust exemption legislation. The Senate Judiciary Committee's recommendation that an exemption conditioned on substantial elimination of the various intra-league restraints be granted was not acceptable to the defendants, and no legislation on the matter has been promulgated.

In August, 1973, Judge Tenney's earlier order was modified by allowing the two leagues to negotiate a merger or consolidation on the condition that any merger or consolidation agreement "deal specifically with and indicate the disposition of uniform player contracts, the common draft, and the reserve clause . . .," and that the negotiations relating to those matters be conducted in the presence of plaintiffs' counsel or the general counsel of the National Basketball Players Association (Players Association). No agreement among the parties has yet been reached.

II The Immediate Controversy

A. Plaintiffs' Claims

1. Count One

Count One of the complaint alleges that at least since its inception in 1946, the NBA has engaged in a concerted plan, combination or conspiracy to monopolize and restrain trade and commerce in major league professional basketball by: (1) controlling, regulating and dictating the terms upon which professional major league basketball is played in the United States; (2) allocating and dividing the market of professional player talent; and (3) enforcing its monopoly and restraint of trade through boycotts, blacklists and concerted refusals to deal. NBA's purported objective is the elimination of all competition in the acquisition, allocation and employment of the services of professional basketball players ?€” all in violation of Sections 1 and 2 of the Sherman Act.

The following practices are cited as among the means used by the NBA to effectuate and advance the underlying objectives of the conspiracy:

(1) The College Draft is allegedly designed to prevent competition among member NBA clubs for what is virtually the exclusive source of basketball talent in the country. The system operates so that each NBA club is given the exclusive right to choose specific college players with whom it desires to negotiate. If the college player does not wish to negotiate or play for the NBA club which "owns" his rights, the player may not negotiate with or for any other NBA club;

(2) The Uniform Contract, entitled the "National Basketball Association-Uniform Contract"⁶ must be signed by every college player who agrees to play with one of the NBA clubs after he is "drafted," and by every veteran player each year. The contract provides that the player shall play basketball for his club or its assignees exclusively until "sold" or "traded"; that the club has the absolute right to sell, exchange, assign or transfer the Uniform Contract on the same terms to another club; and that if the player refuses to play, the club may either terminate the Uniform Contract or seek an injunction to prevent the player from playing basketball for anyone else;

(3) The Reserve Clause is a part of the Uniform Contract which, if a player refuses to sign the Uniform Contract for the next playing season, empowers the club unilaterally to renew and extend the Uniform Contract for one year on the same terms and conditions including salary.⁷ Any "traded" or "sold" player is bound to his new club by the reserve clause. Plaintiffs contend that the reserve clause gives the NBA clubs the express and unilateral right to keep renewing the Uniform Contract each year so long as the player refuses to execute the Uniform Contract, thus binding the player to one club for his entire playing career.

(4) Boycotts, Blacklisting and Refusals to Deal are allegedly utilized as well. Plaintiffs contend that no NBA club will negotiate with a player to play for another club who has signed or refused to sign the Uniform Contract, and is thus under "reserve". Nor will any NBA club negotiate for the services of a player who is voluntarily retired from another club, under suspension, in military service, disabled or injured. Any NBA club which contracts or negotiates with such a player is similarly boycotted, blacklisted or otherwise penalized;

(5) The New League is off-limits to NBA players. Plaintiffs assert that the NBA has used the practices summarized in (1) through (4) above to prevent the players not only from negotiating freely with member clubs of the NBA, but also from negotiating with or playing for clubs in any rival league.⁸

In sum, Count One sets forth the acts and practices of the NBA which are purportedly designed "to prevent in perpetuity any player from playing professional basketball for anyone other than the NBA club to which the exclusive rights to his services have been granted by defendants for his lifetime."⁹

2. Count Two

The circumstances which give rise to Count One¹⁰ also underlie Count Two. Plaintiffs contend that even if the reserve clause is not deemed to be a perpetual right of renewal, and instead is interpreted and enforced as a one-year option after the Uniform Contract term expires, nonetheless, the contract is still in violation of Sections 1 and 2 of the Sherman Act. The same combination and conspiracy alleged and described in Count One prevent any other NBA club from negotiating with or hiring a player during this one-year option period. After the expiration of the one-year period, the player who would try to negotiate with another NBA club, or the club which agreed to negotiate with the player, would be subjected to boycott, blacklisting, refusals to deal, or other penalties which the defendants allegedly impose to enforce their combination to monopolize and restrain trade.

This count additionally attacks what is designated "predatory" tactics waged by the NBA on the ABA. After the expiration of the one-year option provided under the Uniform Contract, the existence of a rival league is said to provide an "escape route" from the anti-competitive structure of the NBA since a player could attempt to negotiate with clubs of that league. Since 1967, however, the complaint states that the NBA has unlawfully combined or conspired to preserve its monopoly position and further its illegal restraints by employing certain devices to destroy the ABA. Those attempts have failed, according to the plaintiffs, and the rival league now flourishes to the decided and obvious financial advantage of present and future NBA players.¹¹

This failure to destroy the ABA has allegedly led to a new combination or conspiracy by the NBA to suppress competition by an attempted merger or consolidation of the two leagues which will lead to the demise of the ABA as a competitive force. Among the means employed by the NBA, even prior to actual merger, is the enactment of a non-competition agreement between the leagues and their clubs, and secret negotiations with the ABA to effectuate the merger of the two leagues.

3. Count Three

Count Three joins the ABA as a defendant and is based on the aforesaid merger plans and non-competition agreement. Essentially it charges both the NBA and the ABA with violations of Sections 1 and 2 of the Sherman Act. Consummation of the merger, it is alleged, would eliminate all actual and...