US Football League v. NAT. FOOTBALL LEAGUE

Citation634 F. Supp. 1155
Decision Date24 April 1986
Docket NumberNo. 84 Civ. 7484 (PKL).,84 Civ. 7484 (PKL).
PartiesUNITED STATES FOOTBALL LEAGUE, et al., Plaintiffs, v. NATIONAL FOOTBALL LEAGUE, et al., Defendants.
CourtU.S. District Court — Southern District of New York

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Finley, Kumble, Wagner, Heine, Underberg, Manley, Meyerson & Casey, Spengler Carlson Gubar Brodsky & Frischling, New York City, for plaintiffs.

Davis Polk & Wardwell, Skadden, Arps, Slate, Meagher & Flom, New York City, Covington & Burling, Washington, D.C., for defendants.

LEISURE, District Judge:

The United States Football League and certain of its member clubs (collectively referred to as the "USFL"), have sued the National Football League, its commissioner and certain of its member clubs (hereinafter collectively referred to as the "NFL"), to obtain declaratory and injunctive relief and to recover damages resulting from alleged violations of Sections 1 and 2 of the Sherman Anti-Trust Act, 15 U.S.C. ?? 1 & 2, and the common law.

The USFL has moved for partial summary judgment on the basis that the NFL's continuing conduct violates a judicial decree issued in 1953 and construed in 1961. United States v. National Football League, 116 F.Supp. 319 (E.D.Pa.1953), construed, 196 F.Supp. 445 (E.D.Pa.1961), order entered, No. 12808 (E.D.Pa. July 28, 1961). The USFL claims that this decree precludes the NFL from entering into television contracts which tie up more than one network. Summary judgment therefore should be granted in favor of the USFL declaring the NFL's pooled rights television contracts with the American Broadcasting Company ("ABC"), the Columbia Broadcasting System ("CBS"), and the National Broadcasting Company ("NBC") to be unlawful and enjoining their further performance. The NFL opposes the motion on the grounds that it has express Congressional sanction in the form of a specific exemption from antitrust laws to enter into pooled rights television contracts with more than one network. For the reasons presented below, the USFL's motion is denied.

Factual Background
The NFL Network Contracts

The NFL has entered into pooled rights television contracts with the three nationwide television networks. Each of the NFL contracts with ABC, CBS, and NBC is non-exclusive. None of the three networks is precluded from telecasting USFL games. When the contracts terminate, each of the networks can choose to bid, or not to bid, for the rights to continue to telecast NFL games. Each contract is of limited duration and provides the network with the right of first negotiation and the right of first refusal with respect to contract renewals. Each contract provides the network with exclusive bargaining rights for a prescribed period of time.

Litigation History

In 1951, the United States sought to enjoin the enforcement of Article X of the NFL's By-Laws which governed the telecasting and broadcasting of outside games into the home territories of other teams. Article X provided, inter alia, that no team could broadcast or telecast its games into the "home territory" of another team, whether that team was playing at home or away. The government contended that this By-Law eliminated competition among member clubs in selling the broadcast and telecast rights of their games, thereby restricting the public's access to broadcasts and telecasts of NFL games. After a trial, the Hon. Allan K. Grim, United States District Judge, applied a rule of reason analysis in holding that the restriction on telecasting outside games in home territories when the home teams play away games constituted an unreasonable and illegal restraint of trade. United States v. National Football League, 116 F.Supp. at 326, 327 (E.D.Pa.1953). The court enjoined enforcement of Article X to the extent it prohibited "outside" game telecasts in a team's market when the team was playing away. Id. at 330. The court also enjoined all territorial restrictions on the sale of radio broadcast rights. Section V of the final judgment in the case provides for, in pertinent part, the following:

The defendants are jointly and severally ... enjoined ... from directly or indirectly entering into ... any contract, agreement or understanding with the league defendant or any member club of the league defendant, ... having the purpose or effect of restricting the areas within which broadcasts or telecasts of games ... may be made.

United States v. National Football League, No. 12808, Final Judgment, ? V (E.D.Pa. Dec. 28, 1953).

In 1961, the NFL entered into a pooled rights television contract with CBS. Concerned that this agreement might violate the terms of Judge Grim's December 28, 1953 decree, the NFL petitioned the court for a construction of the Final Judgment. The NFL sought a determination as to whether that judgment prevented the NFL member clubs from agreeing to sell their pooled television broadcast rights. Concededly, the contract with CBS provided therein that CBS had the "right to determine, entirely within its own discretion ... which games shall be telecast and where such games be televised." United States v. National Football League, 196 F.Supp. 445, 447 (E.D.Pa.1961). The court reasoned that this grant of power to CBS to determine which games shall be telecast and where was contrary to Section V of the Final Judgment. Id. at 447. The court held, therefore, that the Final Judgment prohibited execution and performance of the pooled rights contract with CBS. Id.

A subsequent motion by the NFL for a modification or a temporary suspension of the Final Judgment was denied. United States v. National Football League, No. 12808, order entered (E.D.Pa. July 28, 1961). The July 28, 1961 Order specifically enjoined the execution and performance of the NFL-CBS contract "and of the agreement among defendants for the sale of pooled television rights underlying said contract." The Order further enjoined the defendants from entering into "any other contract and agreement having a similar purpose or effect."

Statutory Antitrust Exemption

On September 30, 1961, the NFL secured enactment of the Sports Broadcasting Act of 1961, which relieved the NFL of the effect of Judge Grim's decision. Pub.L. No. 87-331, ? 1, 75 Stat. 732 (codified as amended at 15 U.S.C. ? 1291) ("1961 Legislation"). This statute now provides in relevant part, for the following.

The antitrust laws ... shall not apply to any joint agreement ... by which any league of clubs participating in professional football, baseball, basketball, or hockey contests sells or otherwise transfers all or any part of the rights of such league's member clubs in the sponsored telecasting of the games ... engaged in or conducted by such clubs.

15 U.S.C. ? 1291. The 1961 Legislation limited the exemption provided by ? 1291 to the extent that telecasts of professional football games on Friday nights and Saturdays during the college football season were forbidden in order to protect college football games from competition with telecasts of professional football games. Pub.L. No. 87-331, ? 2 (codified as amended at 15 U.S.C. ? 1293). In 1966, when the NFL and the AFL merged, Congress amended ? 1291 to provide antitrust immunity to the merger agreement itself. Pub.L. No. 89-800, ? 6(b)(1), 80 Stat. 1515 ("1966 Merger Legislation"). At the same time, the restriction on Friday night and Saturday telecasts was expanded to include protection for high school football. Id., ? 6(b)(3).

The Contentions of the Parties

Notwithstanding the clear and unambiguous language of ? 1291 that the antitrust laws shall not apply to "any joint agreement," the USFL contends that the exemption is limited to the sale of pooled broadcasting rights to a single network. This contention is based upon the USFL's interpretation of the statute's legislative history and the intent of the NFL at that time to enter into a pooled broadcast rights contract with one network only. The USFL contends that principles of collateral estoppel require the Court to hold that the fact of the NFL's current broadcasting contracts with all three networks amounts to a per se violation of the antitrust laws. It is argued that since the 1961 Legislation overruled Judge Grim's decision only to the extent that the NFL contracted with one network, the two remaining agreements violate the antitrust laws under Judge Grim's decision.

The NFL opposes this argument on several grounds. But, as a threshold matter, the NFL contends that the USFL motion places before the Court the basic legal question of whether the antitrust exemption created in 1961 extends to more than one network contract. Stated differently, the motion presents the question whether "the fact that the NFL has contracts with CBS, NBC and ABC is ... in and of itself a violation of the Sherman Act." Defendants' Response to Plaintiffs' Motion for Summary Judgment, at 10. The NFL, in effect, has cross-moved for a declaration that the fact of the three network contracts does not per se violate the antitrust laws.

Legislative History

In considering the issues presented on this motion, the Court is mindful that "exemptions from the antitrust laws are to be narrowly construed." Group Life & Health Insurance Co. v. Royal Drug Co., 440 U.S. 205, 231, 99 S.Ct. 1067, 1083, 59 L.Ed.2d 261 (1979) (citations omitted). It appears to the Court that the statutory language in issue has a plain and unambiguous meaning and that the term "any" means that the antitrust exemption applies to all pooled rights contracts that a sports league may enter into. Not one, but all. Nowhere in ? 1291 or the subsequent sections of the 1961 Legislation does it state that the exemption limits the NFL to one network.

The NFL contends that this situation renders it unnecessary for the Court to delve into the legislative history of the 1961 Legislation and the 1966 Merger Legislation in order for the...

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