Return to City of Oakland v Raiders, NFL

Will Oakland Survive NFL’s Motion to Dismiss? (Part 2)

raiders helmet-judge with gavelJanuary 12, 2020
Sheilla Dingus

On Friday the NFL responded to the City of Oakland in a bid for early dismissal of the antitrust lawsuit related to the Raiders relocation to Las Vegas.  In Part 1 we looked at the NFL’s claims that  Oakland did not properly allege injury under antitrust law, which was a requirement of Judge Spero’s order dismissing Oakland’s first complaint with leave to amend.

In the amended complaint, attorney Jim Quinn, representing Oakland went into great detail outlining the NFL’s cartel-like structure and how that anti-competitive structure had damaged the city in its efforts to retain the Raiders, or at least have a viable chance of hosting another NFL team.  I felt the clarifications and case law cited in Oakland’s prior reply brief were strong enough to survive the NFL and Raiders’ arguments to dismiss in that area, but other elements remain on the table.

Using the same format as in Part 1, we now look at the NFL’s arguments, Judge Spero’s guideposts, and Oakland’s briefs, to examine the question, “Is Oakland a proper plaintiff?”

The Arguments

NFL: Oakland Is Not A Proper Antitrust Plaintiff

NFL:
  • Even if someone suffered antitrust injury from the Raiders’ move to Las Vegas, Oakland did not.
  • Oakland lacks standing because it did not pay the alleged overcharge caused by the challenged conduct.
  • Los Angeles recently attracted two teams with no municipal contribution, a fact to which the  Opposition did not even respond. But the key point here is that Oakland did not incur—and cannot claim to have incurred—any such expense.  That failure is fatal to Oakland’s claim of standing.
  • Montreal Trading Ltd. v. Amax Inc., 661 F.2d 864 (10th Cir. 1981) holds that non-purchasers (e.g., those allegedly priced out of the market by the defendants’ high prices) lack standing. Oakland attempts to distinguish Montreal Trading on the ground that—unlike the plaintiff there—it had a prior course of dealing with the Defendants.
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.
  • To the extent that Oakland might have paid such a premium to upgrade the Coliseum when the Raiders returned from Los Angeles in the 1990s, it has not asserted that possible injury as a basis for its claims, and the four-year statute of limitations for such a claim has almost certainly expired.
Oakland
  • NFL Clubs can demand supra-competitive prices from the consumer group at issue here – Host Cities like Oakland – by threatening relocation and demanding, among other things, massive public subsidies for new stadia and almost rent-free use of those stadia.
  • Oakland tried, but was unable, to pay these artificially-created pricing demands. So, after over twenty years in Oakland –with world-famous “Raider Nation” fans – the NFL has moved the Raiders to Las Vegas because that city managed to pay a supra-competitive “hosting” price and Defendants, collectively, have become much richer.
  • Further, the price Las Vegas paid was exorbitant, supra-competitive, and far above the marginal cost of running an NFL team. The Raiders and the NFL extracted an extortionist price from Las Vegas and are currently sharing, and will continue to share, in the enormous profits from that extortion. Oakland was unable, and unwilling, to pay that anticompetitive price.
  • 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. The Court enumerated objective considerations – then lacking in Article 4.3 – such as population, economic projections, facilities, regional balance, fan loyalty, and team rivalries, among others, that should guide Defendants’ territorial allocations of NFL teams in order to mitigate their collective actions under the rule of reason.

oakland40

  • Further, that the NFL’s boycott of Oakland may not fall within the parameters of per se antitrust violations does not in any way mean it is not an organized boycott subject to the rule of reason analysis under Section 1 of the Sherman Act. See, e.g., St. Paul Fire Marine Ins. Co. v. Barry, 438 U.S. 531, 544 (1978) (defining parameters of a group boycott and stating that “‘the Sherman Act makes it an offense for [businessmen] to agree among themselves to stop selling to particular customers’”)
  • 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.

Analysis:

Oakland did an excellent job delving into how the NFL profits from its anti-competitive behavior and cites Ninth Circuit case law in Raiders I and Raiders II that should hold as binding precedent.  In addition to this St. Paul Fire Marine Ins. Co. v. Barry also supports Oakland’s position.

On the other hand, the case law cited by the Raiders and NFL in Montreal Trading would infer that Las Vegas would be the proper plaintiff to make an antitrust claim since that city is actually paying the supra inflated fees, whereas Oakland is not.

“As regards Montreal Trading’s claim of an inability to purchase because defendants limited production as part of a price fixing conspiracy, defendants argue that as one who never purchased potash, Montreal Trading lacks standing to sue since any injury it suffered because of defendants’ actions was too remote; and that only those who purchased potash at the artificially high price would have suffered a sufficiently direct injury to have standing to bring an action. As regards Montreal Trading’s claim of a concerted refusal to deal, defendants argue that a refusal to sell Canadian potash to a Canadian company is not a transaction in “trade or commerce among the several states or with foreign nations,” 15 U.S.C. § 1 and 2, and has too insignificant an effect on such commerce to justify federal court jurisdiction. We agree with both of these arguments.”  Montreal Trading Ltd. v. Amax Inc., 661 F.2d 864, 866 (10th Cir. 1981)

Coming from the Tenth Circuit, Montreal Trading is considered persuasive authority, but it is not binding on the Ninth.  In addition to the antitrust arguments, Montreal Trading involves a company that was priced out of the market but did not have a prior relationship with the defendant.  Laws involving international trade also come into play.

In addition, the following assertions were made under the same heading arguing whether or not Oakland has standing under antitrust law.

NFL:
  • Oakland complains that it cannot attract a new team (or retain the Raiders) without paying a high price; in that regard, it is situated similarly to every other city in America that might want an NFL team if it could attract one with a modest (or no) contribution or investment. That is a “seemingly unlimited number of plaintiffs” (661 F.2d at 868), of precisely the kind that led the Montreal Trading court to deny standing.
Judge Spero:
  • 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. See Udom v. Fonseca, 846 F.2d 1236, 1238 (9th Cir. 1988)
Oakland:
  • [A]s shown in the below chart, it is the Host Cities (and their taxpayers) who fund the vast majority of new stadia or stadia renovations that Defendants can command because of their artificially-created market power:

New and renovated stadia

Spero appears to view Oakland’s claims (at least in the original complaint) as “attorney arguments” rather than true allegations.  Whether or not he will view the assertions in the FAC as having cured that deficiency is a tough call.

The NFL asserts, “the FAC does not (i) identify any ownership group that sought admission and was denied or (ii) describe any effort by Oakland to secure a new team that was unsuccessful due to the vote requirement.”  Since no new teams have applied for admission to the NFL in decades, it’s difficult for Oakland to plead this argument with specificity as it did when showing the prevalence of public stadium funding. Since the NFL merged with the AFL in 1970, only a small handful of expansion teams have been admitted: In 1976 the Tampa Bay Buccaneers and Seattle Seahawks were added.  In 1995, the Carolina Panthers and Jacksonville Jaguars, and in 1997 the Baltimore Ravens were admitted.  The Houston Texans, in 2002 were the last expansion team to join the NFL.  Oddly, both sides attempt to use this fact to their advantage—the NFL arguing that new franchises have been admitted and Oakland pointing out that there have been no newcomers in 18 years.

The Curious Case of the USFL

One case that might have some relevance to this one was a lawsuit against the NFL by the United States Football League (USFL) in 1986.

After five days of deliberations, the jury found that the NFL had willfully acquired or maintained monopoly power in a market consisting of major-league professional football in the United States. The jury also found that the NFL’s unlawful monopolization of professional football had injured the USFL. The jury awarded the USFL only $1.00 in damages, however, an amount that, even when trebled, was no consolation for the USFL. U.S. Football League v. Natl. Football League, 842 F.2d 1335, 1341 (2d Cir. 1988)

In this highly publicized case, a jury found the NFL to be a monopoly but awarded the USFL only $1.00 in damages, trebled to $3.00 in that they found the USFL’s own mismanagement had contributed to their losses to a greater degree than the NFL’s monopoly.  The USFL had made antitrust claims based on the NFL’s network deals and their own inability to secure coverage by more than one network, however on this count, the jury ruled in favor of the NFL.

The lawsuit was driven by Donald Trump, who owned the USFL team New Jersey Generals and sought to move games from the spring to fall in order to compete head to head with the NFL.  Some pundits have speculated that Trump had hoped to force a merger between the two leagues rather than merely securing additional broadcasting contracts as a result of the lawsuit.  Instead, it backfired, putting a quick end to the newly-formed football league.

Donald Trump and the USFL lawsuitAccording to The Guardian, citing to transcripts from the trial, Trump claimed the NFL had offered him a franchise in exchange for dropping the lawsuit; a claim Commissioner Pete Rozelle adamantly denied.

Rozelle couldn’t believe what he was hearing. He made clear that it was Trump who reserved and paid for the Pierre suite. He told Rothman: “[Trump] said, ‘I want an NFL expansion team in New York.’ And he said, and I’m quoting him exactly, ‘I would get some stiff to buy the New York Generals, my team in the USFL.’” Unlike Trump, Rozelle was a meticulous note-taker, and he presented his documented recollections from the meeting… Rozelle insisted he would rather have maggot-infected fungus overtaking his cranial lobe.

Rozelle’s cool, controlled testimony was Kryptonite to Trump’s apparent unhinged allergies to truth. Rothman asked, repeatedly, what motivated Trump’s actions, then showed the jury multiple documents – signed or written by the Generals’ owner – that alluded to a “merger” and “merger strategy.” Trump denied his motive was to have the USFL and NFL become one, but lacked credibility. “It was so obvious that’s what this was all about,” said Sibilia [Patricia Sibilia was a juror in the trial]. “No question.”

Trump also unsuccessfully tried to buy the New England Patriots and Buffalo Bills but seemed shut out of the elite NFL owners’ club. While I’d personally tend to agree with Rozelle’s assessment, it’s true that the billionaire club of NFL owners is very selective as to whom they admit to their ranks.

A Detour into the Weeds

When former Panthers’ owner, Jerry Richardson abruptly decided to sell his franchise after serious allegations of sexual misconduct and racism surfaced, numerous potential buyers surfaced, showing interest, some of whom did not fit the pattern of a typical NFL owner.  Among them were musician and entrepreneur Diddy partnering with NBA star Steph Curry, singer Jon Bon Jovi, and NBA legend and Charlotte Hornets owner Michael Jordan.  While rich, all of these candidates would be considered “new wealth” and aside from not matching the typical owner demographic, were unable to meet the NFL’s requirement that a single incoming owner must still control at least 30% of the equity of the team with debt limits capped at $250 million.  While understandable that the owners would seek an individual with financial stability, the 30% equity requirement seems designed to disqualify some newer billionaires who may not fit the mold.

Dallas Mavericks owner Mark Cuban was also interested in acquiring the Panthers, but Forbes reported, “Cuban would face resistance for multiple reasons. Three years ago he blasted the NFL saying ‘pigs get fat, hogs get slaughtered. And [it’s] getting hoggy.’  Cuban would almost certainly have to sell the Mavericks to buy the Panthers if owners even allowed him into their club. Cross-ownership rules are in place where you cannot own an NFL franchise if you own a major sports team in another market with an NFL franchise.”  The NFL made an exception for Stan Kronke, who was permitted to purchase the Rams, but Forbes opined, “Don’t expect any favors for Cuban.”

Another candidate, Philadelphia entrepreneur Michael Rubin, who was also of the required financial standing, with no conflicting team ownership, appeared to be viewed as an outsider. According to the Charlotte Observer, “If the 45-year-old should prevail in acquiring the Panthers, the NFL would be adding someone who doesn’t fit the mold of the stereotypical silver-haired billionaire.  ‘He brings a different perspective,’ an NFL ownership source told the Observer.”

Likewise, the path for a publicly owned team like the Green Bay Packers was closed in the 1960 NFL Constitution.  The “Green Bay” rule states that ‘charitable organizations and/or corporations not organized for profit and not now a member of the league may not hold membership in the National Football League.’”

The NFL wound up approving hedge fund owner David Tepper for the sale—a man much more aligned with current ownership characteristics.

Only four NFL franchises have been sold in the past decade or so and at each juncture, the NFL carefully groomed the candidates and approved the one they apparently found most like themselves.  The rules they’ve created seem meticulously crafted to prohibit entry to those they view as “outsiders” or potential challengers with a “different perspective.”  Of course, in order to have a successful cartel, all of the members must be willing participants.

Back Out of the Weeds

The ownership structure while not an argument that can be alleged in the complaint is another factor that would support Oakland’s allegations of a cartel that has worked cooperatively to advance profits through a collusive monopoly.  The issue seems relevant because no new teams have been added or have even attempted admission to the NFL in almost 20 years, but franchises have been sold—four in the past decade—and the barriers to ownership entry could possibly be viewed parallel with the exclusivity of team-non-expansion.

I generally try to get a feel for a judge’s likely judicial philosophy in looking at the party that appointed them, but since Joseph Spero is a magistrate judge, he was not appointed by a president as an Article III judge with a lifetime term.  Instead, magistrate judges are appointed by the district court judges to 8-year terms that can be extended.  I was unable to find a similar case that he’s ruled on, so I went to robingroom.com for some clues.

The Robing Room is a website in which attorneys are able anonymously rate and review the judges they’ve appeared before.  Judges are ranked on a scale of 1 – 10.  Only a small sample of opinions was available, but of the ten, posted Spero averaged a score of 6.25, with a median rating of 6.  The general consensus among the attorneys—both those who favored him and those who did not—is that he pushes very hard for settlements.  If the Oakland lawsuit survives the motion to dismiss, it’s probably a safe bet that he’ll push aggressively for one in this case.

A government attorney commented, “Superb judge. Couldn’t be better for settling cases.”  A private civil litigation attorney said, “He is incredibly intelligent, hardworking, and he will do everything in his considerable power to settle cases – including twisting arms, hard. I have appeared before him many times and have always found him to be very well-prepared on all issues presented, asking intelligent questions. He gets crabby if you get off-track or try to b.s. him! He keeps strong control of all proceedings.”  Almost all the attorneys considered him intelligent and several others noted his intolerance if he thinks the arguments are drivel;  “He will cast off the bookish demeanor in a microsecond if he feels you’re bullshitting, and he will make you instantly regret trying.”   Several other attorneys found him condescending.

One attorney said, “if you represent a civil rights plaintiff, realize he sets an extremely high bar of what constitutes a constitutional violation.”  Some attorneys felt he favored corporate interests.  Perhaps this is due to his background prior to becoming a magistrate judge.  Spero worked in the antitrust division of Skadden Arps, a top-shelf firm known for defending corporate clients.  As an attorney there, he likely made similar arguments as the NFL on behalf of his clients, and this could be a window into his mindset.  This isn’t a given, though.  In a blistering opinion, Judge Spero ruled against United Health Care in a lawsuit about their denials of mental health coverage and approved a class of minor league baseball players seeking minimum wage.

The Verdict

It’s almost a coin-toss as to how Judge Spero will view the issue of whether Oakland is a proper plaintiff to sue for antitrust violations.  He has Ninth Circuit precedent that favors Oakland in Raiders I and Raiders II, however, in his order of dismissal, he cited another Ninth Circuit case that he apparently feels has bearing on the one before him.  His cited case, Udom v. Fonseca, appears to be more closely focused on statute of limitation issues rather than antitrust violations.  Perhaps Spero considered Udom in concluding that Oakland’s prior relocation expenditures for the move from LA are past the statute of limitations, or perhaps he sees another element of Udom that he finds relevant.

The Montreal Trading opinion cited to several Supreme Court cases that are binding on all federal courts:

While the statutory language is broad, the Supreme Court has held that the injury must result from the type of harm the antitrust laws were intended to prevent. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 48997 S.Ct. 690, 69750 L.Ed.2d 701 (1977). In addition, the Supreme Court has endorsed limitations on standing to sue for antitrust injury, an issue it has termed analytically distinct, Illinois Brick Co. v. Illinois, 431 U.S. 720, 728 n. 7, 97 S.Ct. 2061, 2065-66 n. 7, 52 L.Ed.2d 707 (1977), and has generally left it to the lower courts to formulate those limitations. The circuits have, for the most part, either limited standing to those “directly injured” or to those “in the target area” of the antitrust violation. See In re Multidistrict Vehicle Air Pollution Litigation M. D. L. No. 31, 481 F.2d 122, 126-28 (9th Cir.), cert. denied, 414 U.S. 104594 S.Ct. 55138 L.Ed.2d 336 (1973) (collecting both direct injury and target area cases); Berger Bernstein, An Analytical Framework for Antitrust Standing, 86 Yale L.J. 809, 813-35 (1977).

Referencing In re Multidistrict Vehicle Air Pollution Litigation M. D. L. No. 31, it appears that district courts have fairly wide latitude on determining antitrust standing.  There are conflicting arguments that favor both sides on this point, and as such, this one could be a coin-toss, but based on Spero’s background and comments from The Robing Room, I’m inclined to give the NFL a slight edge on this argument.

When I set out to write about the NFL’s reply brief, I didn’t plan on writing nearly this much, but while diving in, I felt the need to dig deeper, so in Part 3 in which we’ll tackle the question, “Did Oakland suffer direct injury?”

Part 1
Does Oakland State a Proper Antitrust Claim?
Part 3
Did Oakland Suffer a Direct Injury
Part 4
Is the NFL’s Relocation Policy a Contract?


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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.

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