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Will Oakland Survive the NFL’s Motion to Dismiss (Part 3)

Raiders helmet in Northern District of California CourtJanuary 13, 2020
Sheilla Dingus

In Part 1 of our deep-dive on the Oakland lawsuit, we covered whether Oakland had properly alleged an antitrust claim and in Part 2, if Oakland was the proper plaintiff.  Without taking time to review, we’ll move ahead to the next argument presented by the NFL in their recent brief.

As noted in Part 2, “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.)  This means that the direct standing argument could have great impact on the case depending on how broad or narrow Judge Joseph C. Spero views the net.

The Arguments:

NFL: Oakland Lacks Standing Because Any Injury Is Indirect.

NFL
  • Defendants demonstrated in their opening brief that Oakland’s alleged injury is too indirect to afford standing because any injury-in-fact would be derivative of the “harm” suffered by Oakland’s prospective tenant, which presumably would have unsuccessfully sought to join the NFL.
Judge Spero
  • The Court declines to read R.C. Dick as barring all antitrust claims where plaintiff claims damages from its status as a landlord, and instead construes that case as requiring that, for such damages to be viable, the market at issue in the case must be the market for rental transactions, and the plaintiff must show an anticompetitive effect in that market.
  • If, for example, a cartel of all potential renters of a certain type of property conspired to fix a low price at which they were willing to rent, a landlord adversely affected by that agreement could likely recover antitrust damages.
  • While the Court disagrees with Defendants’ position that an antitrust plaintiff’s status as a landlord is inherently disqualifying,the principle that landlords might in some circumstances be able to claim antitrust damages for lost or reduced rent does not clearly apply to Oakland’s claims here, because Oakland has not specifically alleged damages based specifically on rent (although it is perhaps conceivable that it could amend to do so). Instead, Oakland claims damages based on sunk investments, lost “tax and [unspecified] other income,” and diminution in property value of the Coliseum.
Oakland
  • Pursuant to the NFL Constitution and the Relocation Policies, Defendants assumed direct obligations to Oakland.
  • Cities, counties, and other political jurisdictions spend considerable money and effort trying to attract major professional sports teams in the belief that these teams will generate direct payments to local government [and] economic benefits to the community.
  • Here, the Oakland Coliseum is jointly owned by two political entities, Oakland and Alameda County, and managed by the Authority (which is controlled by Oakland and Alameda County). In Raiders I, the owner of the stadium sued; here also, the owner of the stadium has sued.
  • [T]he jury in that case [Raiders II] concluded that there are no reasonably interchangeable products or services for NFL football teams in the Host City/stadia market.
  • Defendants’ reliance on Montreal Trading is misplaced.3 Concerned about the directness of alleged injury, Montreal Trading sought to draw a line as to which parties can claim antitrust injury when a purchase is not made. In that case, the Tenth Circuit held that an antitrust plaintiff lacks standing where it sues based on goods it never purchased, where the plaintiff “has no prior course of dealing with any defendant.”
  • Such collusive conduct has been enormously injurious to Oakland as outlined below.

oakland201

Analysis:

In Oakland’s First Amended Complaint (FAC), multiple damages are alleged, though rent was not among them.  It’s likely the NFL wanted to focus on rent because the Raiders were given free or sharply discounted rent with the City’s income flowing from other sources.

Judge Spero notes that lost rents may be recoverable but adds that Oakland has not alleged that loss, but rather the losses highlighted above.  In the FAC, Oakland notes that rents are among the revenue sources that Oakland has lost in order to obtain the funds to repay debt incurred to retain the Raiders.

Continuing with the arguments:

NFL
  • Oakland also ignores its own allegation that it is only an “indirect owner of the Coliseum” and its acknowledgment that the “Coliseum is jointly owned by Oakland and Alameda County and is leased to the Oakland-Alameda County Coliseum Financing Corporation, which, in turn, has assigned its rights under that lease to the Oakland-Alameda County Coliseum Authority.” FAC ¶29. Oakland does not wholly own or control the Coliseum.
Judge Spero
  • It is also not clear that Oakland’s status as an “indirect” landlord, with the OACCA as a middleman directly contracting with the Raiders, bars Oakland’s claims.
  • Neither party cites authority addressing analogous circumstances where, as was allegedly the case here, an antitrust plaintiff negotiated directly with the defendant despite their contractual relationship running through a third party. Moreover, Oakland alleges that it sought to build a new stadium in partnership with the Raiders and other investors, with no allegation that the OACCA or any other intermediary would be involved in that relationship.
  • At this time, while it remains unclear whether Oakland can amend to cure the more straightforward question of antitrust injury addressed above, Court declines to resolve the issue of whether Oakland’s “indirect” relationship with the Raiders bars its antitrust claims
Oakland
  • Oakland, with the County of Alameda, directly owns the Coliseum at which the Raiders currently play professional football in the NFL.
  • The Coliseum is jointly owned by Oakland and Alameda County and is leased to the Oakland-Alameda County Coliseum Financing Corporation, which, in turn, has assigned its rights under that lease to the Oakland-Alameda County Coliseum Authority (“Authority”).
  • The Authority exists “to finance improvements to the Oakland Alameda County Coliseum Complex, and to manage the Coliseum Complex on behalf of the City and the County.”
  • The Authority is directly controlled by Oakland and Alameda County, and the Authority’s board of directors is made up of Oakland and Alameda County representatives.

Analysis:

The NFL’s arguments as to the identity of the landlord seem to be a strawman.  Oakland states that it directly owns the coliseum jointly with Alameda County.  A property owner who utilizes the services of a leasing agent has not forfeited her property and is still very much the owner and true landlord, even if the tenant deals directly with the property owner’s agent, as is the case here.

While Judge Spero declined to rule on the “indirect relationship” he did not seem to view it as a major obstacle if Oakland can meet his bar in other areas of standing.

Hawaii:

One of the stated obstacles Oakland must clear in order to meet Judge Spero’s bar is Hawaii v. Standard Oil Co. of California.

NFL:
  • Oakland continues its failed quest to distinguish Hawaii v. Standard Oil Co., 405 U.S. 251 (1972), a position that the Court rejected in its Order (at 21–22).
  • Oakland argues that Hawaii is distinguishable because it is suing in its “proprietary capacity,” but it is wrong. The City’s suit to recover lost tax revenue is not a suit for “damages for injuries to its commercial interests” which are the only damages that constitute injury to “business or property” within the scope of Section 4 of the Clayton Act (which creates the private right of action to sue under the Sherman Act).
Judge Spero:
  • Oakland also cannot recover damages based on lost tax revenue from the broad scope of economic activity associated with the presence of a professional football team.
  • Defendants rely on the Supreme Court’s holding in Hawaii v. Standard Oil Co. of California, 405 U.S. 251 (1972), that the Clayton Act’s authorization of private suits for injury to business or property” does not allow a state to sue as parens patriae for damages based on general damage to its economy. In reaching that outcome, the Court concluded that where a “State seeks damages for injuries to its commercial interests, it may sue under § 4[, b]ut where, as here, the state seeks damages for other injuries,”—including those based on its “quasi-sovereign interests”—“it is not properly within the Clayton Act.”
  • Defendants here, as well as the United States in a statement of interest filed pursuant to the attorney general’s authority under 28 U.S.C. § 517,13 contend that damages based on lost taxes fall in the latter category as an element of the state’s sovereign rather than commercial interest.
  • While Oakland is correct that it has a more personal and proprietary interest in damages based on lost tax revenue than a state has in a parens patriae suit for “injury to its general economy,” see Hawaii, 405 U.S. at 263–64, lost tax revenue based broadly on “the presence of the Raiders and the economic activity their presence generates,” is not the sort of injury to “business or property” compensable under the antitrust laws.
  • [B]ecause the taxes Oakland claims to have lost would have been assessed on transactions involving countless third parties, any of whom might (or might not) be entitled to their own claims if, as Oakland contends, the Raiders’ relocation arose from violations of the Sherman Act.
  • Oakland cites no case allowing a comparable theory of damages under the Clayton Act, and the Court DISMISSES Oakland’s claims to the extent they are based on lost tax revenue based on undefined “economic activity” associated with the Raiders.
Oakland:
  • Tax revenues impact the whole structure of a Host City-sports team relationship and result in sports teams receiving significant financial benefits that they otherwise would not have received. To deny the recovery of lost tax revenues would allow professional sports teams, like the Raiders, to reap the taxpayer-financed benefits derived from the prospects of tax revenues, but then claim immunity from liability when their unlawful conduct injures the Host Cities that provided those benefits.
  • The decision in Hawaii v. Standard Oil Co. of Calif., 405 U.S. 251 (1972) is not to the contrary. In fact, the majority opinion in that case never mentions “tax revenues” and never reaches the issue of damages proximately caused by violations of the antitrust laws. Instead, Hawaii stands for a simple proposition: political entities cannot sue in parens patriae for general damages to their citizens or economies. The issue in Hawaii was standing, not what damages antitrust violations proximately cause.  Citing from Hawaii:

Hawaii cite

Analysis:

hawaii warningThe first thing that caught my attention when I pulled Hawaii, was that a warning flag for citation was displayed.

The warning flag pointed to two contradictory opinions, one of which originated in the Ninth Circuit.  In California State Council v. Associated General, 648 F.2d 527, 538 (9th Cir. 1980).  In California, the Ninth Circuit held that “injury to the Unions’ business was more than merely a “foreseeable consequence” of the AGCC’s boycott of union-signatory subcontractors — it was the intended result.” and “Under the target area test then, the Unions’ complaint satisfies the legal causation requirement for standing.”

Oakland has asserted genuine monetary damages in loans that must be repaid without the benefit of the revenue they expected to receive, and had in the past, received from the Raiders.  Oakland would also appear to be “more than merely a foreseeable consequence,” but the intended target, as alleged.

Though lost tax revenues have been challenged by both the federal government in an interest brief, and the NFL, citing Hawaii as well as concerns by Judge Spero, Oakland differentiates their position from the one in the NFL’s chosen case law.

Hawaiis principal standing

In Radovich v. Nat. Football League, 352 U.S. 445 (1957), the Supreme Court held that the NFL is subject to antitrust law and though it has found minor exemptions since that time, such as Brown v. Pro Football, Inc. 518 U.S. 231, 248 (1996) in which Justice Stephen Breyer wrote for the majority, “clubs that make up a professional sports league are not completely independent economic competitors, as they depend upon a degree of cooperation for economic survival,”  Radovich has generally withstood the NFL’s challenges.

Verdict:

Oakland has pleaded real damages and has challenged the interpretation of Hawaii, to demonstrate standing regarding lost taxes that are directly tied to the Raiders’ presence. They have argued that there are no overlapping claims, because the tax revenue they seek is derived from the revenue generated by the Raiders and should a business seek to sue for damages, the money sought by Oakland would not be recoverable by that business, nor does Oakland seek to recover damages incurred by that business.

If not for Judge Spero’s interpretation of Hawaii when dismissing the original complaint, and the government’s brief alluding to the same, I’d think the issue would be a near slam-dunk for Oakland.  It remains to be seen if Spero will revise his considerations based on Oakland’s arguments, but I believe that regardless, Oakland’s other damage claims will survive the motion to dismiss.

In Part 1 we covered the question of whether Oakland fails to state an antitrust claim.  In Part 2 we looked at the question, “Is Oakland a proper plaintiff?”  Read on for an analysis of the arguments regarding the NFL’s relocation policy.

Part 1
Does Oakland State a Proper Antitrust Claim?
Part 2
Is Oakland a Proper Antitrust Plaintiff?
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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