Tanaka v. University of Southern California

• Decision Date: 05 February 2001
• Docket Number: PLAINTIFF-APPELLANT,No. 00-55046,DEFENDANTS-APPELLEES,PACIFIC-10,00-55046
• Citation: 252 F.3d 1059
• Parties: (9th Cir. 2001) RHIANNON TANAKA,, v. UNIVERSITY OF SOUTHERN CALIFORNIA; MICHAEL GARRETT; DARYL GROSS;CONFERENCE; NATIONAL COLLEGIATE ATHLETIC ASSOCIATION,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1059

252 F.3d 1059 (9th Cir. 2001)

RHIANNON TANAKA, PLAINTIFF-APPELLANT, v. UNIVERSITY OF SOUTHERN CALIFORNIA; MICHAEL GARRETT; DARYL GROSS; PACIFIC-10 CONFERENCE; NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, DEFENDANTS-APPELLEES.

No. 00-55046

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted February 5, 2001--Pasadena, California

Filed June 7, 2001

Renee M. Smith, Hermosa Beach, California, for the plaintiff-appellant.

Frank M. Hinman (argued), McCutchen, Doyle, Brown & Enersen, Llp, San Francisco, California, for defendant-appellee Pacific-10 Conference; Scott A. Edelman, Gibson, Dunn & Crutcher, Llp, Los Angeles, California, for defendants-appellees University of Southern California, Michael Garrett, and Daryl Gross; Robert J. Wierenga, Miller, Canfield, Paddock and Stone, P.L.C., Ann Arbor, Michigan, and Mark L. Eisenhut, Call, Clayton & Jensen, Newport Beach, California, for defendant-appellee National Collegiate Athletic Association.

Appeal from the United States District Court for the Central District of California Gary L. Taylor, District Judge, Presiding D.C. No. CV-99-00663-GLT

Before: Diarmuid F. O'Scannlain, Andrew J. Kleinfeld, and Raymond C. Fisher, Circuit Judges.

The opinion of the court was delivered by: O'scannlain, Circuit Judge

Opinion by Judge O'Scannlain

OPINION

We must decide whether a former collegiate soccer player may pursue her federal antitrust challenge to an intercollegiate athletic association rule that discourages student-athletes from transferring to member institutions during the course of their collegiate athletic careers.

I.

A star high school soccer player, Rhiannon Tanaka ("Tanaka") was heavily recruited by the athletic programs of a number of universities, including the University of Southern California ("USC"), which belongs to the Pacific-10 Conference ("Pac-10"). The Pac-10 is an association of ten universities which was formed for the purpose of "establishing an athletic program to be participated in by the members." Hairston v. Pacific 10 Conference, 101 F.3d 1315, 1317 (9th Cir. 1996).¹ During her senior year of high school, Tanaka met with USC athletic officials, including Michael Garrett and Daryl Gross, who allegedly made certain representations to her regarding the USC women's soccer program. She also inquired about transfer restrictions, and was allegedly told that she would be free to transfer without penalty provided she remained at USC for one year and met minimum academic requirements. Tanaka thereupon signed a letter of intent to enroll at USC and attended USC for the 1994-95 academic year.

Tanaka quickly became dissatisfied with the state of USC's women's soccer program and the quality of her USC education. In particular, she claims that USC was arranging for athletes to receive fraudulent academic credit through sham classes. In the spring of 1995, she received permission from USC to communicate with other schools about transferring to their programs. Because she wished to remain in Los Angeles, and because its women's soccer program was nationally ranked, she decided to transfer to the University of California, Los Angeles ("UCLA"), another Pac-10 member institution.

USC opposed Tanaka's transfer to UCLA, however, and sought sanctions against her pursuant to Pac-10 Rule C 8-3-b ("transfer rule"), which governs intra-conference transfer. The rule provides, in pertinent part:

Each institution, before it permits a student who has transferred directly or indirectly from, or practiced at, another Pacific-10 member institution to compete in intercollegiate athletics, shall require the student to fulfill a residence requirement of two full academic years . . . and shall charge the student with two years of eligibility in all Pacific-10 sports, and during the period of ineligibility shall not offer, provide, or arrange directly or indirectly any earned or unearned athletically related financial aid.

USC insisted that Tanaka sit out her first year at UCLA and lose one year of athletic eligibility.² Tanaka unsuccessfully appealed her sanction. In addition to her loss of athletic eligibility, Tanaka was denied any athletically related financial aid during her first semester at UCLA.

Tanaka alleges that USC invoked the transfer rule sanctions against her in retaliation for her participation in an investigation into possible academic fraud involving student-athletes at the school. In fact, her complaint expressly alleges that she "is the only transferring athlete who had the sanctions imposed on her" (emphasis in original), and further that"[i]n all other instances where student-athletes transferred from USC, Pacific-10 penalties had not been used."

In May 1998, Tanaka filed an unsuccessful state-court action for fraud against USC. On May 5, 1999, Tanaka filed the instant action, asserting a state breach of contract claim and a claim under the Clayton Act, 15 U.S.C. §§ 15, predicated on a violation of section one of the Sherman Act, 15 U.S.C. §§ 1. The district court dismissed the complaint in August 1999 with leave to amend. Tanaka filed her first amended complaint on September 13, 1999. On November 15, 1999, the district court again dismissed, this time with prejudice. The court held that the Pac-10 transfer rule was beyond the reach of the Sherman Act because it was essentially "noncommercial" in nature, reasoning the rule "is more tied to defendants' noncommercial rather than commercial activities. " The court noted that, even if the Sherman Act applied, Tanaka would likely still lose, as the transfer rule would not be found unreasonable under the rule of reason. The court declined to exercise supplemental jurisdiction over Tanaka's state contract claim pursuant to 28 U.S.C. §§ 1367(c)(3). This timely appeal followed.

II.

A.

Section one of the Sherman Act ("Act") provides in pertinent part:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.

15 U.S.C. §§ 1. In order to establish a claim under Section 1, a plaintiff must demonstrate: " `(1) that there was a contract, combination, or conspiracy; (2) that the agreement unreasonably restrained trade under either a per se rule of illegality or a rule of reason analysis; and (3) that the restraint affected interstate commerce.' " Hairston, 101 F.3d at 1318 (9th Cir. 1996) (quoting Bhan v. NME Hosp., Inc., 929 F.2d 1404, 1410 (9th Cir. 1991)). The district court concluded that Tanaka failed to meet the second part of this test, reasoning that the transfer rule is essentially "noncommercial," and hence does not involve "trade." Thus, according to the district court, the transfer rule is simply not subject to antitrust analysis because it is beyond the scope of the Act.

Of course, "[o]ur review is not limited to a consideration of the grounds upon which the district court decided the issues; we can affirm the district court on any grounds supported by the record." Weiser v. United States, 959 F.2d 146, 147 (9th Cir. 1992). We need not reach the difficult issue of whether collegiate athletic association eligibility rules such as the Pac10 transfer rule do not involve commercial activity and hence are immune from Sherman Act scrutiny. For purposes of our analysis, we assume, without deciding, that the transfer rule is subject to the federal antitrust laws.

B.

Tanaka does not contend that the transfer rule is unlawful per se, but rather concedes that it is subject to rule of reason analysis. We agree. See NCAA v. Bd. of Regents, 468 U.S. 85, 117 (1984) (holding that NCAA restrictions on the televising of college football games, which involved limits on output and price-fixing, was subject to rule of reason analysis); Mackey v. Nat'l Football League, 543 F.2d 606 (8th Cir. 1976) (holding that league's restrictions on free agency were subject to rule of reason analysis despite restrictions' resemblance to restraints ordinarily constituting per se antitrust violations, such as group boycotts and concerted refusals to deal).

A restraint violates the rule of reason if the restraint's harm to competition outweighs its procompetitive effects. Hairston, 101 F.3d at 1319. The plaintiff bears the initial burden of showing that the restraint produces "significant anticompetitive effects" within a "relevant market." Id. If the plaintiff meets this burden, the defendant must come forward with evidence of the restraint's procompetitive effects. The plaintiff must then show that "any legitimate objectives can be achieved in a substantially less restrictive manner." Id.

We have explained that the term "relevant market"

encompasses notions of geography as well as product use, quality, and description. The geographic market extends to the " `area of effective competition' . . . where buyers can turn for alternative sources of supply." The product market includes the pool of goods or services that enjoy reasonable interchangeability of use and cross-elasticity of demand. Oltz v. St. Peter's Cmty. Hosp., 861 F.2d 1440, 1446 (9th Cir. 1988) (quoting Moore v. Jas. H. Matthews & Co. , 550 F.2d 1207, 1218 (9th Cir. 1977)) (alteration in original) (internal citations omitted). Failure to identify a relevant market is a proper ground for dismissing a Sherman Act claim. Big Bear Lodging Ass'n v. Snow Summit, Inc., 182 F.3d 1096, 1105 (9th Cir. 1999).

1.

Tanaka's complaint alleges that the relevant geographic market is Los Angeles and the relevant product market is the "UCLA women's soccer program." Neither of these "markets" is appropriately defined for antitrust purposes, even at this stage of the litigation. First, Tanaka fails to allege that Los Angeles is an "area of effective competition " for studentathletes competing for positions in women's intercollegiate soccer programs. In her reply brief, Tanaka explains that "the relevant market is [ ]...