Seattle Totems Hockey Club, Inc. v. National Hockey League
| Decision Date | 28 February 1986 |
| Docket Number | Nos. 84-3581,84-3605,s. 84-3581 |
| Citation | 783 F.2d 1347 |
| Parties | 1986-1 Trade Cases 66,968 SEATTLE TOTEMS HOCKEY CLUB, INC., Eldred W. Barnes, and Vincent H.D. Abbey, Plaintiffs-Appellants, v. The NATIONAL HOCKEY LEAGUE, the Vancouver Hockey Club, Ltd., Northwest Sports Enterprises, Ltd., et al., Defendants-Appellees. NORTHWEST SPORTS ENTERPRISES, LTD., Counterclaimant-Appellee, v. Vincent H.D. ABBEY, and Eldred W. Barnes, Counterdefendants-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Thomas J. Greenan, Ferguson & Burdell, Richard F. Krutch, Krutch, Lindell, Donnelly & Judkins, Seattle, Wash., for Seattle Totems Hockey Club, et. al.
Fredric C. Tausend, Schweppe, Doolittle, Krug, Tausend & Beezer, Seattle, Wash., Herbert Dym, Covington & Burling, Washington, D.C., for Nat. Hockey League, et al.
Appeal from the United States District Court for the Western District of Washington.
Before WRIGHT, CANBY and WIGGINS, Circuit Judges.
This case arises out of the financial demise of plaintiff Seattle Totems, a hockey team of which plaintiffs Vincent H.D. Abbey and Eldred W. Barnes were principal officers, directors and shareholders. The Totems and Abbey and Barnes brought an antitrust action against the defendant National Hockey League (NHL) and some of its members. One member of that league is the Vancouver Canucks, owned by defendant Northwest Sports Enterprises, Inc. Northwest Sports counterclaimed, asserting certain breaches of contract by plaintiffs.
The district court dismissed plaintiffs' antitrust claims and directed a verdict granting part of defendants' counterclaim and denying the rest. We review both the dismissals and the directed verdict de novo, viewing the evidence in the light most favorable to the losing party. Los Angeles Memorial Coliseum Com'n v. National Football League, 726 F.2d 1381, 1387 (9th Cir.), cert. denied, --- U.S.---, 105 S.Ct. 397, 83 L.Ed.2d 331 (1984) (directed verdict). Because the antitrust and contract issues were tried separately, we review them separately here.
The Seattle Totems were a minor league hockey team that played in the Western Hockey League (WHL). They suffered financial difficulties, and in 1971, the WHL terminated their franchise. In 1972, Northwest Sports purchased 55.56% of the Totems' stock. Northwest Sports also agreed to assume the Totems' liabilities and to advance funds for their operations. Abbey and Barnes, who owned a 44.44% interest in the Totems, continued as shareholders and agreed to guarantee repayment of their pro rata share of Northwest Sports' advances to the Totems. The Totems regained their WHL franchise.
In 1971, the World Hockey Association (WHA), which is not a party to this action, was formed as a major professional hockey league. The WHA competed with the established major league, defendant NHL, for players, fans, and revenues.
With the emergence of a second major league, WHL owners concluded that WHL teams needed major league status to survive. In June 1972, the NHL and the WHL entered into an agreement called the "White Paper." The White Paper provided that, if the NHL expanded after the 1974-75 season, it would offer to WHL members at least one-half of any expansion franchises in four WHL cities. In June 1974, the NHL voted to award a conditional franchise to Abbey for Seattle to commence play in the 1976-77 season. The conditional franchise for Seattle expired because Abbey did not fulfill the conditions. The NHL did not award a conditional or final franchise for Seattle to anyone else. The Totems did not seek or receive a WHA franchise.
On appeal, the Totems 1 challenge the district court's dismissal of their antitrust claims that the alleged NHL monopoly wrongfully denied Totems an NHL franchise, denied them the opportunity to join the WHA, and destroyed the WHL. We affirm.
The district court dismissed the Totems' claim for damages for their failure to receive an NHL franchise. The district court found that "any denial of an NHL franchise to plaintiffs ... was procompetitive, rather than anti-competitive in its effect and hence not violative of the anti-trust laws."
The Totems argue that they were injured by an NHL monopoly that allegedly violated the antitrust laws. They contend that the NHL and its member teams have monopolized professional hockey in North America. The Totems cite a number of agreements and practices through which the NHL achieved the alleged monopoly. The Totems claim that the NHL monopoly was "exercised to exclude competition and to obtain total control over all major league professional hockey franchises, including the purchase prices paid therefor [sic]."
The offense of monopolization (15 U.S.C. Sec. 2) consists of the willful acquisition or maintenance of monopoly power in the relevant market and the existence of actual injury to competition in that market. See General Business Systems v. North American Philips Corp., 699 F.2d 965, 970-71 (9th Cir.1983) and cases cited therein. "To establish anticompetitive market effect, the plaintiff must prove that the defendant's actions caused a decrease in competition in the relevant market." 2 Aydin Corp. v. Loral Corp., 718 F.2d 897, 902 (9th Cir.1983). A plaintiff has the burden to plead and prove that the defendant's actions harmed competition, not that the actions harmed plaintiff in its capacity as a competitor. Id. at 902 (citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 697, 50 L.Ed. 701 (1977); Gough v. Rossmoor Corp., 585 F.2d 381, 386 (9th Cir.1978), cert. denied, 440 U.S. 936, 99 S.Ct. 1280, 59 L.Ed.2d 494 (1979)).
The Totems were not competing with the NHL; they were seeking to join it. They were granted a conditional NHL franchise but failed to fulfill the conditions precedent to obtaining a final franchise. The WHA was competing as a major professional hockey league at that time. Without an NHL franchise Seattle constituted a potential WHA site, and the denial, if any, of an NHL franchise under these circumstances did not injure competition. See Mid-South Grizzlies v. National Football League, 720 F.2d 772 (3d Cir.1983), cert. denied, 467 U.S. 1215, 104 S.Ct. 2657, 81 L.Ed.2d 364 (1984). There is no contention or showing that the denial was to protect any other major league team in the Seattle market; there was none. See id. at 787; Los Angeles Memorial Coliseum Com'n, 726 F.2d 1381 ().
The Totems argue that there is more here than the mere denial of a sports franchise. They argue that there was a grand scheme on the part of the NHL to destroy the WHA by promising franchises to WHL teams so that those teams would not join the WHA. "Once peace had been made between the NHL and WHA, however, the NHL moved to avoid its responsibilities" under its White Paper agreement with the WHL. One of those alleged "moves" was apparently to deny Seattle a franchise. This argument misses the point. The Totems' allegations of wrongful conduct by the NHL do not establish that competition in the relevant market was injured by those acts. Consequently, the Totems have failed to meet their burden of proof on this issue. 3
The district court dismissed the Totems' claim that they were denied an opportunity to join the WHA "for lack of evidence in the record as to the value of a Seattle franchise in that league." 4 "An antitrust plaintiff who is excluded from the relevant market by anticompetitive activity is entitled to recover his lost profits." Dolphin Tours, Inc. v. Pacifico Creative Service, Inc., 773 F.2d 1506, 1511 (9th Cir.1985). Alternatively, a plaintiff who is excluded from the relevant market may seek to recover the value of his business. Id. at 1511 n. 4. A defendant, whose illegal conduct excluded others from the relevant market, should not benefit because its actions make it more difficult for the plaintiff to establish the amount of its injury. Id. at 1512. There must, however, be sufficient evidence from which a jury could determine the amount of damages, and the plaintiff bears the burden of anticipating a hypothetical free market in establishing the amount of his injury. Id. The trier of fact is allowed to act on probative and inferential proof in determining those damages, although the award may be an approximation. Id. at 1511.
The Totems allege that the NHL's anticompetitive activities caused the Totems to be unable to secure a WHA franchise. The district court found that the measure of the Totems' damages on this claim was the value of a WHA franchise in Seattle at the time it was foreclosed from joining the WHA, not the value of an NHL franchise at that time. The Totems, therefore, had the burden of establishing the value of a Seattle WHA team in a hypothetical economic free market. See id. at 1512. The Totems presented no evidence to establish that value. Consequently, there was not sufficient evidence from which a jury could have determined damages, and the trial judge properly dismissed this claim.
The district court dismissed the Totems' claim that they were denied the opportunity to form a new major hockey league with other WHL teams. The court found a lack of evidence in the record to sustain that claim. Specifically, the court ruled that "[t]o recover on this claim plaintiffs must prove the intention and preparedness of the WHL clubs to form such a league." The court held that there was no evidence in the record to sustain an affirmative finding upon either element, and that "[t]here is in fact much evidence to the contrary." In addition, the Totems presented no evidence of the value of a Seattle franchise in such a league.
The WHL teams opted not to join the WHA or to form an independent major hockey league. Instead, the...
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