Raiders, NFL Respond to Oakland in a Bid to Dismiss (Part 1)

zzJanuary 11, 2020
Sheilla Dingus

On Friday the NFL, and Mark Davis, led Raiders responded to the City of Oakland’s recent brief, hoping to put a quick end to their lawsuit seeking damages for the Raiders’ relocation to Las Vegas.

NFL Reply Brief in Support of Motion to Dismiss

A quick view of the contents reveals that the NFL is still pursuing the same arguments as before the response from the City was filed, namely, “Oakland Lacks Standing To Sue Under The Antitrust Laws,” “Oakland Has Not Alleged Injury,”, “Oakland’s Claims Fail As A Substantive Matter,” and in all caps, “THE CITY OF OAKLAND FAILS TO STATE A CONTRACT CLAIM.” Let’s take a look at their arguments and see how the reply of the white-shoe firms of Arnold & Porter and Covington & Burling representing the NFL stack against the City of Oakland’s brief, authored by famed litigator Jim Quinn.

The NFL’s brief begins with the following introduction:

The indented portion quotes from Judge Spero’s order asserting that Oakland “has not alleged injury-in-fact.” In addition, Judge Spero opined:

The legal standard Spero sought derives from American Needle and NCAA v Bd. Of Regents,

“[I]t is not material whether Oakland captions its claims as based on theories of “boycott” or “price fixing.” Regardless of such labels, Oakland must “demonstrate that a particular contract or combination is in fact unreasonable and anticompetitive…In other words, it is not enough that a plaintiff has been injured; the plaintiff also “must have ‘antitrust standing.’” Id. That question turns on the following factors: “(1) the nature of the plaintiff’s alleged injury; that is, whether it was the type the antitrust laws were intended to forestall; (2) the directness of the injury; (3) the speculative measure of the harm; (4) the risk of duplicative recovery; and (5) the complexity in apportioning damages.”

In his analysis dismissing the original complaint with leave to amend, Spero deferred to the “Rule of Reason,” that has proved to be a formidable challenge to plaintiffs challenging sports organizations.

“Where some “‘restraints on competition are essential if the product is to be available at all,’” however—as in the case of professional sports leagues—“per se rules of illegality are inapplicable, and instead the restraint must be judged according to the flexible Rule of Reason.”

The NFL brief doubles down that Oakland has still failed to meet the threshold.

The Arguments

NFL: Oakland Fails to State an Antitrust Claim

To best analyze the arguments, let’s take a look at the major points made by each party, noting that Judge Spero’s position was based on the original and not the amended complaint.

The NFL:

Oakland attempts to sidestep its obligation to allege and prove injury-in-fact by claiming that the existence of “barriers to entry” relieved it of the obligation to allege each element of the causal chain required to establish injury-in-fact.

But that is not the law, and the cases that Oakland cites do not come close to supporting its position. Unlike Oakland, the plaintiffs in US Airways and Microsoft identified specific competitors that had been foreclosed from the market by the defendant’s conduct.

Judge Spero:

Oakland does not contend that it actually paid the inflated rates of public stadium funding that teams could purportedly obtain as a result of the league’s structure. instead, Oakland argues that it would have been able to host an NFL team if the NFL allowed more teams in the league, asserting in its opposition brief that “in a competitive market, there would now be 33 clubs, with one in Oakland and one in Las Vegas (and probably 35 clubs, with clubs also in St. Louis and San Diego).”

Oakland’s complaint, however, does not include allegations to that effect, and attorney argument in a brief cannot substitute for allegations of a complaint.

Oakland:

Oakland added significant additional facts to its FAC. First, Oakland included detailed facts and economic analyses regarding the “closed” sports leagues in the United States in general and the NFL’s closed structure specifically. These facts and analyses explain that through an artificial restraint on the supply of professional football teams – and an extraordinary level of revenue sharing – Defendants have created a professional football market that defies basic competitive principles. (Reply brief)

In order to remain the host city of an NFL team (“Host City”), Oakland was asked to pay supra-competitive prices, including stadium investments, which are effectively a forced subsidy. When Oakland could not pay those prices, Defendants punished the city: they voted to allow the Raiders to move to Las Vegas, which left Oakland without an NFL team and caused significant losses to Oakland. (FAC)

Although Oakland went to extraordinary efforts to keep the Raiders from leaving for Las Vegas, Defendants ignored Oakland and decided to fully exploit their artificially-created market control… Even though Oakland is a more significant metropolitan market, the Raiders’ move to Las Vegas allows Defendants – a cartel that engages in significant revenue sharing – to reap a financial windfall. (FAC)

Defendants’ decision was driven by “control[ling], if not prevent[ing] competition among NFL teams through territorial divisions.” L.A. Mem’l Coliseum Comm’n v. Nat’l Football League (“Raiders I”), 726 F.2d 1381, 1391 (9th Cir. 1984). In other words, Defendants not only limit the supply of NFL teams in the marketplace, they also dictate where those teams will be allocated by territory… Defendants, as a revenue-sharing cartel, reap enormous supra-competitive profits when a team moves to a new territory. Of course, dictating where a team may move is exactly the same thing as preventing a team from moving in the first place. Both are restrictions on movement imposed by Defendants to restrain competition in the marketplace for NFL teams. (FAC)

This revenue sharing means that each NFL Club benefits from every other NFL Club’s financial gains. It also means that Defendants have little incentive to add more NFL teams – a new team is just another mouth to feed. Unlike true competitors in a truly competitive marketplace, NFL Clubs operate their businesses with the understanding that they will profit not from their own efforts in that market but, rather, through the collective efforts of a limited number of NFL teams. (FAC)

Raiders I, 726 F.2d 1381 (9th Cir. 1984). The Ninth Circuit found that, while some collective restraints may be necessary to producing a successful NFL product, such restraints must be closely tailored to advancing that purpose in order to withstand antitrust scrutiny.

Analysis:

The NFL never concedes an easy win and often seeks to deflect away from legitimate arguments as it does here. Oakland’s First Amended Complaint (FAC) goes into extensive detail as to how the NFL’s revenue-sharing works to create a cartel and restrain trade. It also elaborates on Oakland’s fruitless attempts to retain the Raiders and demonstrates this is due to the closed nature of the NFL, compared with European soccer leagues, and how it makes obtaining another NFL team a virtual impossibility.

Oakland also cites binding Ninth Circuit precedent in Raiders I which should carry weight with Judge Spero or failing that, on an appeal to the Ninth Circuit. Unfortunately, sports leagues and associations have been subject to the “Rule of Reason” as noted by Judge Spero, and this has at times allowed anti-competitive behavior to continue with more leniency toward sports organizations than other industries enjoy. “The Rule of Reason” is also responsible for the plaintiffs’ limited wins against the NCAA in O’Bannon and Alston.

In Alston and O’Bannon, the NCAA claimed its anticompetitive behavior was due to the unique nature of the “collegiate model” and that its style of amateurism separated it from professional sports and was essential to its continued popularity. While I personally believe the NCAA’s argument is contrived and completely false, courts, including the Ninth Circuit have given deference to the “amateur model,” and as such have made only minor adjustments while conceding that their model clearly is in opposition to anti-trust law.

The NFL makes no such argument nor does it present any pretense justifying its anti-competitive behavior outside of profit, and the assertion that they are entitled to make their own business decisions.

The NFL also claims that Oakland’s case law is invalid because the plaintiffs in the cited cases “identified specific competitors that had been foreclosed from the market by the defendant’ conduct,” implying that Oakland did not.

To the contrary, Oakland cites a very recent example of another city foreclosed from the market in St. Louis, stating it its reply brief, “the Missouri court overseeing the action by the City of St. Louis against Defendants for the relocation of the Rams has rejected the very same Relocation Policy arguments made by Defendants here using the same pleading standard.” Furthermore, Oakland argues:

Verdict:

I tend to agree with Oakland’s assessment, and it appears based on the current status of proceedings in St. Louis that should Spero dismiss on these grounds conflicting case law will emerge if upheld at the Ninth Circuit. While it’s true that Oakland was unable to name a new team that sought to enter the market and was barred by the NFL, that seems to be a straw man argument. One could plausibly argue that no new teams have formed and attempted to join the NFL due to its anticompetitive model and it’s generally understood that the enormous costs involved would end in a fruitless endeavor due to the NFL’s operating practices. If Spero takes the plaintiffs’ pleadings as true as demanded in the pleading stage as long as a plausible argument is made, I believe Oakland’s arguments in this respect are strong enough to survive the current motion to dismiss.

There are other arguments that come into play and will factor into Judge Spero’s analysis in granting or denying the NFL’s motion to dismiss. We’ll take a look at the questions, “Is Oakland a Proper Antitrust Plaintiff?” in Part 2 and “Did Oakland suffer a direct injury?” in Part 3.

Part 2 Is Oakland a Proper Antitrust Plaintiff?	Part 3 Did Oakland Suffer a Direct Injury?	Part 4 Is the NFL’s Relocation Policy a Contract?
Part 2	Part 3	Part 4

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Sheilla Dingus

Editor at Advocacy for Fairness in Sports | Website

Sheilla Dingus founded Advocacy for Fairness in Sports in October 2016, after a stint with Defenders of the Wall, a New England Patriots based blog where she dived deep into the legal aspects of Deflategate. Along the way, she observed many inequities in sports and felt a need to address some of the under-reported stories in sports law. She draws from her background as a former professional dancer, who like many of the athletes she writes about, took an early retirement due to orthopedic injuries. After a return trip to college she worked for a legal software company, with seven years as a Project Manager and Analyst. She brings her analytical skills to the table in breaking down complex lawsuits, and enjoys pursuing her longtime interest in journalism.