December 23, 2019
Following the announcement of the Raiders’ impending relocation to Las Vegas, the City of Oakland filed an antitrust lawsuit against the Raiders and NFL claiming damages due to their artificial restraints on trade, breach of contract, and violations of their own policies.
All of the key documents in the case to date can be found in our Cloud Archive. The Raiders and NFL, in a motion to dismiss, deny that they are in violation of antitrust law and claim they are merely businessmen looking after business. The government surprisingly stepped in filing a brief opposing Oakland’s ability to claim lost tax revenue as part of the damages the city will suffer as a result of the team’s departure. In what I feel is the strongest brief of the lawsuit to date, the legendary litigator who is representing Oakland pro bono, James “Jim” Quinn, responded in opposition to the defendants’ motion to dismiss.
Prior to this filing, I’d commented on several other filings on Twitter, including Judge Spero’s dismissal with leave to amend and demonstrate standing (damages.) I noted that while I felt the Amended Complaint strongly presented the city’s antitrust argument, that it may have fallen short on Spero’s threshold of damages. In studying Quinn’s reply brief, a mere, 35 pages compared with the 88-page Amended Complaint, he appears to have anticipated the arguments presented by the NFL as well as Judge Spero’s damages quest. Several folks on both sides of the lawsuit—those favoring Oakland—and those eager to see the Raiders move to Las Vegas have requested my commentary on the current brief. Here are what I consider to be the most crucial highlights.
“Describing it as an ‘extortion,’ a ‘sabotage,’ and an ‘exploitation,’ numerous economists have recognized that the NFL, as a ‘closed’ sports league, artificially restricts the supply of teams to force cities to make a Hobson’s Choice: pay Defendants’ anticompetitive price or lose your team.” This quote sets the pace and tone for the remainder of the brief. As does this excerpt.
This statement, which is developed further in the brief, concisely illustrates how no city can become a Host City, or remain one, without the blessing of the NFL, regardless of the suitability of the city to successfully support a team, as Oakland has demonstrated it has, losing its team only because the city refuses to allow itself to be extorted of taxpayer funds.
Quinn also brings out that the Defendants all but ignore the FAC’s economic analysis and includes caselaw that he says would be effectively overturned if the Court should grant the motion to dismiss, de facto exempting the NFL from anti-trust scrutiny (which seems to be the defendants’ desired outcome.)
Quinn specifically addresses Judge Spero’s order and demonstrates his compliance in the areas where the Judge felt the initial arguments were insufficient.
He notes that he has specifically addressed the possibility of adding additional teams to the NFL and the NFL’s closed structure which makes this extremely unlikely, enabling their harmful behavior to potential host cities or past host cities with proven capability of supporting a team.
The damages Judge Spero wanted addressed in order to establish standing to sue was the area in which I felt the FAC fell a bit short. It is my opinion that these issues were adequately addressed in the reply brief, as I’ll explain in a bit.
This was also well covered in the FAC and tightened up in the reply brief.
In the following sections, Quinn points out how the FAC delivered the arguments necessary to continue the litigation.
The 32 Teams
I feel Quinn’s strongest arguments are in this area. Here are a few bullet-pointed highlights of how this was covered.
- artificial restraint on the supply of professional football teams (insufficient teams to meet the market’s demand.)
- sports leagues restrict the supply of teams to ensure that cities with the potential to host a
professional sports team, but remain without one, exist
- preservation of cities without teams gives the NFL a genuine relocation threat to use in negotiating supra-competitive prices with potential host cities
Oakland’s Attempts to Avoid Relocation Were Fruitless Because of the NFL’s Monopolistic System
- Legitimate offers which Quinn refers to as “extraordinary’ were rejected without true consideration
- “Defendants knew that relocation to Las Vegas would result in even greater supra-competitive revenue to be shared by Defendants.”
- “Both Las Vegas and Oakland were losers – Las Vegas because it was forced to pay a supra-competitive price to host the Raiders and Oakland because it was unable to pay that exorbitant price and thereby lost its status as a Host City.”
- Defendants were the only winners, doubling the enterprise value of the Raiders, obtaining a $378 million relocation fee to be split among the franchises, gaining a new territory and television advertising market. (Due to the 49ers location in the Bay Area the NFL has managed to add, a market without losing one.)
The Relocation Policies’ Purpose Is To Benefit Host Cities
Quinn notes how the NFL’s relocation policies came into existence—as a result of litigation and a proposed federal statute meant to protect host cities from monopolistic behavior.
Legal Standard Regarding Motion to Dismiss
Quinn states that the legal standard regarding a motion to dismiss is low—that a plaintiff must allege enough facts for their claim to be “plausible.” For supporting case law, he used Twombly and Iqbal, two cases that are normally cited by defendants favoring dismissal. Unfortunately, Twombly and Iqbal have been misused by some courts (See my current article on the Lane Johnson lawsuit as one example) but Quinn is correct that sans discovery the pleading standard must, by necessity remain low.
In Judge Spero’s order dismissing Oakland’s original complaint with permission to file an amended complaint, Spero was focused broadly on standing and narrowly on direct damages and this is what the amended complaint and reply brief seek to address; the reply brief specifically addressing the Raiders’/NFL arguments.
Oakland Has Alleged Facts Sufficient To Demonstrate Standing
Countering the NFL’s arguments, Quinn notes that under the NFL’s interpretation of antitrust law it would become effectively moot.
Quinn has backed this with Ninth Circuit case law, showing that Oakland meets Associated Gen. Contractors factors:
Quinn addresses and differentiates the Oakland case from Hawaii and other case law cited by the defendants, and emphasizes, “Defendants’ anticompetitive conduct was directed at and meant to punish, Oakland in its proprietary capacity as an owner of the Coliseum property and Host City of the Raiders. Further, Defendants’ anticompetitive conduct injured a limited number of parties (i.e., Oakland, the County, and Las Vegas), and the damages suffered by those parties are not even theoretically overlapping. Indeed, if Defendants’ arguments were to prevail, Defendants’ anticompetitive conduct with respect to both team expansion and relocation would be effectively exempt from the antitrust laws since Defendants contend no Host City or surrounding area (i.e., county), current or prospective, can sue them. Further, the Ninth Circuit’s holdings in Raiders I and Raiders II would be effectively overruled…Congress has denied Defendants an antitrust exemption for their relocation activities and left in place the system by which injured parties, like Oakland, can commence antitrust actions for those activities. Defendants should not be allowed to manufacture a de facto exemption where Congress has declined to create one.”
Defendants’ Anticompetitive Conduct Directly Injured Oakland
While the claims differ in the Oakland and St. Louis relocation lawsuits, there are commonalities between them. The St. Louis suit is in state court whereas Oakland’s lawsuit is in federal court, however, both entities make common arguments regarding damages and the NFL’s failure to abide by its own relocation rules. The NFL has petitioned for certiorari at the Supreme Court hoping to force the lawsuit into arbitration, having exhausted all appeal options at the state court level, where the plaintiffs have consistently survived motions to dismiss on these grounds. While not impossible, it seems unlikely that the Supreme Court will opt to hear the case and hopefully discovery will now proceed as the Supreme Court declined to stay state court action in a prior ask. It doesn’t seem a stretch that the Northern District of California, especially in view of Raiders I and Raiders II might rule similarly on these issues.
In the reply brief, Quinn points to the defendants’ case law in Rohnert Park and demonstrates that the cited case is much different from Oakland’s in that Rohnert Park centered on a shopping center that was never built as opposed to a stadium which is a reality and not a projection, as well as the interconnections between the city and the stadium and the Raiders.
He adds, “Defendants’ own anticompetitive behavior in erecting barriers to entry and refusing to deal with Oakland, would preclude any showing of proximate cause (i.e., you can’t show that another team would play in the Coliseum because we have not allowed another team to join the NFL in over twenty years). These arguments are circular, economically irrational, and contrary to the purpose of the antitrust laws. Indeed, the “argument that [an antitrust plaintiff] needs to point to a specific ‘dead body’ in order to show that barriers to entry exist is incorrect, and equivalent to saying that a [defendant] will be immune from antitrust scrutiny if it can erect sufficiently high barriers to entry.”
Quinn cites United States v. Microsoft, “requiring antitrust “liability [to] turn on a plaintiff’s ability or inability to reconstruct the hypothetical marketplace absent a defendant’s anticompetitive conduct would only encourage monopolists to take more and earlier anti-competitive action,” demonstrating that should the court dismiss the action on these grounds, antitrust law would be damaged by defendants able to erect sufficient barriers to evade it.
He notes the defendants’ absence of case law in this respect, “Defendants cite no case that requires plaintiffs to identify specific entities that would compete if barriers to entry did not exist because there are none.”
Oakland Has Sufficiently Alleged Injury Arising From Defendants’ Anticompetitive Misconduct
Quinn makes an apt analogy in his counter-argument:
He correctly points to the fact that this sort of behavior is exactly what the Sherman Act was designed to prohibit.
Oakland’s Injuries Are Not “Indirect”
This argument will be a key in prevailing over the motion to dismiss, and it seems that Oakland has adequately pleaded enough facts to keep the case alive. He poses the question that if not a host city, then who is directly impacted to a sufficient degree as to obtain standing, then answers his question with “nobody.” “Pushed to its illogical end, Defendants’ argument would overrule every consumer price-fixing case based on barriers to entry since those consumers would supposedly have “indirect” injuries, “derivative” of the hypothetical suppliers who cannot enter the market. In short, Defendants’ argument is absurd, and Defendants provide no relevant authority to support it,” writes Quinn. He notes that other arguments posed by the defendants are not appropriate for a Rule 12(b)(6) motion but are rather questions to be resolved at trial.
Oakland’s Damages Are Recoverable
In one of the prongs required for a plaintiff to assert standing under Rule 12(b)(6) the plaintiff is to “state a claim on which relief can be granted.” In addressing this argument, Quinn doubles down that tax revenues are a recoverable damage.
Here Quinn attacks the NFL and Raiders’ primary case law differentiating Oakland’s position from Hawaii’s in that the city is asking for proven lost tax revenue as opposed to indirect losses on the part of Oakland’s citizens.
In declaring damages, it’s tricky (outside of tax revenue or other direct forms of compensation) to distinguish between community losses and actual government losses because the government is impacted by the community and vice versa. If sports bars cease to do the same (or no) business, would the revenue be attributable to the defendants’ anticompetitive conduct or would this be considered an indirect loss? Obviously, jobs will be lost. All of the people who worked at the stadium supporting Raiders games will lose their jobs. It would also seem viable that those working at sports bars, hotels, and other businesses that derived a substantial portion of their revenues from the presence of the Raiders would also have a direct impact on the city in increased unemployment, food stamps, and probably health care costs. The city would likely be forced to incur debt to meet some of these expenses but would this be considered a direct or indirect loss? In addition to this Raiders, fan groups have done some impressive work in supporting charities and feeding the homeless. Raiders players have also contributed generously to local charities. This will obviously impact the residents of Oakland, leaving a very large question to be answered. “Will the city step up to fill the void left by charities that are no longer able to support Oakland’s citizens or will the cash-strapped city leave those who were formerly assisted by charities dependent on the Raiders presence out in the cold?” If the City of Oakland does step up to meet the needs, I feel there is a good direct damages argument there, but it seems that Quinn’s brief left many of the specific losses out of his reply brief, perhaps feeling that some of these questions should be answered at trial.
Instead, he states that the diminished value of the Coliseum will be a direct loss to Oakland. “Oakland has pleaded diminution in the value of the Coliseum property, not merely the Coliseum building, and under principles of proximate cause, Defendants are liable for the “present decrease in the economic value of” that property related to their anticompetitive conduct: i.e., their boycott of the Coliseum property as a site for hosting NFL teams…To be sure, plaintiffs would need to quantify the damages resulting from decreased value in order to recover, but that is not necessary to establish injury at the pleading stage.” (Emphasis mine)
This one discreet sentence appears to be important in that it indicates that once the case progresses past the pleading stage that Oakland is prepared to demonstrate specific monetary damages while emphasizing that this information should not be necessary during pre-trial motions.
The lack of concrete numbers was one of the factors that concerned me most regarding the damages section of the FAC. Quinn seems to have addressed that here.
Oakland Sufficiently Alleges A Section 1 Violation And A Relevant Market
Again, Quinn stresses that certain arguments are premature.
Oakland Has Adequately Alleged A Market
That the NFL has argued there is no market for NFL teams, seems preposterous. (San Antonio or London anyone?) but Quinn addresses the argument.
He adds that the NFL has even contradicted itself in this statement.
Oakland Has Adequately Pled A Price-Fixing Scheme
Quinn addresses what seems to be one of the NFL’s strongest arguments—that Oakland is attempting to determine how a private business operates. To this, he replies, “Oakland agrees that it is not the purpose of the antitrust laws to ‘determine the appropriate size of a sports league.’ (MTD at 18). However, it is also not Defendants’ province to make that determination when the purpose of their decision is an anticompetitive restraint of trade. Professors Hovenkamp and Areeda, whom Defendants cite (see id. at 17), make it clear that sports leagues’ exclusionary decisions are illegitimate when they ‘are intended to reinforce price-fixing or another output limitation.’”
Oakland Has Adequately Alleged A Group Boycott
To this argument, Quinn turns to “the rule of reason,” which ironically saved the NCAA from being completely dismantled when it was found guilty of antitrust violations.
Oakland Has Sufficiently Alleged A Breach Claim
As mentioned previously, this is a shared claim with St. Louis, in which the city prevailed each time in state court against the leagues motions to dismiss.
Compare with this excerpt of the St. Louis complaint:
In the Oakland response, Quinn states that the NFL relocation polices are an enforceable contract as affirmed by Missouri courts. He then makes the argument that host cities such as Oakland are third-party beneficiaries to this policy.
He notes that the relocation policies are written to benefit host cities and that “Specifically, Defendants refer to the fact that they purportedly adopted the Relocation Policies in order to protect themselves from antitrust liability and federal regulation.” Why then should the NFL be rewarded for breaking the very rules it created to avoid antitrust liability one must ask.
Oakland’s Unjust Enrichment Claim is Sufficiently Pled
Unjust enrichment is another claim common to the Oakland and St. Louis lawsuits. Both cities note that money was spent to secure their teams while the NFL allegedly acted in self-interest, breaching its own policies at the host cities’ expense.
While I initially felt the damages section of the FAC was sketchy and perhaps insufficient as to meet Judge Spero’s threshold, I feel the reply brief was strong, alluding to the fact that detailed breakdowns should not be required at the pleading stage although I would have preferred to see more references to non-tax revenue in case the government’s odd intervenor brief carries weight with the judge. Hopefully, he’ll see it as one of the government’s recent anomalies, not the least of which is the government’s arbitrary reversal of its own interpretation of the Wire Act, which has already been defeated once and is now starting to contradict its prior revised position as pointed out by noted gaming and sports law attorney Daniel Wallach.
#FakeNews or just factually-challenged?
From the DoJ’s #WireAct brief:
“The OLC did not opine about whether, and if so how, the Wire Act would apply to the particular context of lotteries owned and operated by States.”
— Daniel Wallach (@WALLACHLEGAL) December 23, 2019
In my opinion, the Oakland lawsuit should survive the motion to dismiss. Assuming this occurs, it will be interesting to observe the NFL’s future tactics to avoid discovery and if they will seek to compel arbitration here as they have done, and continue to do through their cert petition in Missouri. It will then fall on Oakland to demonstrate specific rather than abstract damages as the merits briefs ensue.
My early prediction is that this case will settle. I don’t see a court forcing the NFL to remain in Oakland and even in the case of that remote possibility, the City of Las Vegas would have extremely viable damages and breach of contract claim should the Raiders fail to make the move. The City of Oakland has, however, made numerous colorable arguments and has unquestionably been damaged by the Raiders relocation. The NFL will probably want to avoid damaging discovery and fight tooth and nail to avoid it as has been the case in St. Louis. This could easily be a blueprint for Oakland in that if a settlement with St. Louis takes place, Oakland should also be able to recover money through a confidential settlement with the NFL once again, avoiding it’s airing of dirty laundry.
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