UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF NEW YORK
February 21, 1979
NORTH AMERICAN SOCCER LEAGUE et al., Plaintiffs,
NATIONAL FOOTBALL LEAGUE et al., Defendants
The opinion of the court was delivered by: HAIGHT
This is an antitrust case brought by the North American Soccer League ("NASL") and 21 of its member clubs against the National Football League ("NFL") and 25 of its member clubs to test the legality under the Sherman Act, 15 U.S.C. § 1 Et seq., of a proposed amendment to the NFL's constitution and by-laws implementing a "cross-ownership ban." The amendment, if enacted, would prevent the owner of a majority interest in an NFL club, or a member of his family, from acquiring any interest in another major team sport. To the extent that such cross-ownership presently exists, the amendment mandates divestiture, and imposes fines and other sanctions for non-compliance within the time specified. Plaintiffs assert their complaint under Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, and 28 U.S.C. § 2201. They claim injunctive and declaratory relief, and treble money damages. Jurisdiction is posited upon 28 U.S.C. §§ 1331 and 1337, and venue asserted under 28 U.S.C. § 1391 and Sections 4 and 12 of the Clayton Act, 15 U.S.C. §§ 15 and 22. Plaintiffs now move pursuant to Rule 65, F.R.Civ.P. and Section 16 of the Clayton Act, 15 U.S.C. § 26, for a preliminary injunction restraining enactment of the amendment. Because plaintiffs have made the requisite showing for such relief, the injunction will issue.
Preliminarily, we note that a number of the defendant NFL clubs have by their answers contested the Court's jurisdiction over their persons. Whatever the merits of those assertions and the jurisdictional issue is not pressed on this motion it is clear that a preliminary injunction, if otherwise appropriate, would not be inhibited. The NFL does not contest In personam jurisdiction. Rule 65 provides that an injunction is binding:
" . . . upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise."
All member clubs of the NFL are by definition "in active concert or participation with" the League they formed to conduct their joint affairs. There is, in short, the requisite showing of privity. Golden State Bottling Co. v. National Labor Relations Board, 414 U.S. 168, 179-180, 94 S. Ct. 414, 38 L. Ed. 2d 388 (1973); Hart v. Community School Board of Brooklyn, N. Y. School District No. 21, 383 F. Supp. 699, 753 (E.D.N.Y.1974), Appeal dismissed, 497 F.2d 1027 (2d Cir. 1974); 7 Moore's Federal Practice P 65.13 (2d ed. 1978). No difficulty in notifying the NFL member clubs of the Court's order need be anticipated.
Plaintiffs move for a preliminary injunction, prohibitory in nature, to prevent the NFL and its member clubs from enacting a particular amendment to the NFL constitution and by-laws. The record on the motion consists of the pleadings, affidavits and exhibits. Two oral arguments have been heard, the first shortly after service of the motion and the second after filing of extensive and able briefs. While discovery is proceeding on the merits, both plaintiffs and defendants stated that an evidentiary hearing need not precede resolution of the present motion. In these circumstances no evidentiary hearing is required. Jacobson & Co., Inc. v. Armstrong Cork Co., 548 F.2d 438, 442 (2d Cir. 1977).
The showing a plaintiff must make to obtain a preliminary injunction has been the subject of a number of recent Second Circuit decisions, not all of them entirely reconcilable. For a time Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247, 250 (2d Cir. 1973) appeared to declare a two-pronged test as the rule of the Circuit:
"The settled rule is that a preliminary injunction should issue only upon a clear showing of either (1) probable success on the merits And possible irreparable injury, Or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation And a balance of hardships tipping decidedly toward the party requesting the preliminary relief." (emphasis in original).
The Sonesta formulation was repeated in numerous subsequent cases. However, in Triebwasser & Katz v. A. T. & T. Co., 535 F.2d 1356, 1359 (2d Cir. 1976), the Court stressed that irreparable injury was required under both prongs of the Sonesta test:
"(T)his language of the second prong of the Sonesta test does not eliminate the basic obligation of the plaintiff to make a clear showing of the threat of irreparable harm. That is a fundamental and traditional requirement of all preliminary injunctive relief, since equity cannot intervene where there is an adequate remedy at law. If the element of irreparable damage is prerequisite for relief where the plaintiff must show probable success on the merits, then A fortiori where the plaintiff establishes something less than probable success as to the merits, need for proof of the threat of irreparable damage is more pronounced. In sum, the balancing of hardships test of Sonesta necessarily includes the showing of irreparable harm." (emphasis in original) (citations omitted).
Some commentators regarded Triebwasser as a major revision of the Sonesta test, in that Triebwasser required a showing of irreparable harm in the second prong where none had been required before. Other commentators argued that irreparable harm had in the past been part of the second prong's proof of "balance of hardships," a view endorsed shortly after Triebwasser by at least one member of the Second Circuit. Mulligan, Preliminary Injunction in the Second Circuit, 43 Bklyn.L.Rev. 831, 832 (1977); to the extent that Sonesta indicated "that irreparable harm is not necessary for every preliminary injunction," Judge Mulligan disagreed with it. Id. at 839. In New York Association of Homes for Aging v. Toia, 559 F.2d 876, 880 (2d Cir. 1977), the Court said that under either Sonesta test "the movant must show a threat of irreparable harm"; a comparable holding in New York v. Nuclear Regulatory Commission, 550 F.2d 745, 755 (2d Cir. 1977) was embellished by the requirement that "the alleged threats of irreparable harm are not remote or speculative but are actual and imminent." A trace of confusion creeps back in, however, in the Court's recent citation of Sonesta for the proposition that the "moving party must make a showing of Possible irreparable harm," Selchow & Righter Co. v. McGraw-Hill Book Co., 580 F.2d 25, 27 (2d Cir. 1978). Cf. Caulfield v. Board of Education, 583 F.2d 605 (2d Cir. 1978), where the Court announced the standard as "Possible irreparable injury" but found that the District Court "could not conclude that the appellants were Likely to suffer irreparable injury." (emphasis added).
Since the case at bar falls within the antitrust statutes, we must also conjure with 15 U.S.C. § 26, which authorizes a preliminary injunction under general principles of equity "and a showing that the danger of irreparable loss or damage is immediate . . . ." In Triebwasser, supra, the Second Circuit, after characterizing the showing of irreparable harm as necessary under either Sonesta test, went on to observe:
"In antitrust cases, the proposition requires no further elucidation since 15 U.S.C. § 26 explicitly requires for a preliminary injunction a showing "that the danger of irreparable loss or damage is immediate,' and we have so held in a recent private antitrust case, SCM Corp. v. Xerox Corp., 507 F.2d 358, 360 (2d Cir. 1974)."
In SCM Corp. v. Xerox Corp., cited by the Second Circuit in Triebwasser, the Court characterized the Clayton Act's requirements as "merely declarative of ordinary equitable principles." 507 F.2d at 360. Thus the degree to which the Second Circuit regards the statute's requirement of Immediacy as a separate element is somewhat obscure. Jacobson, supra, also an antitrust case, reiterates the Sonesta formulae, 548 F.2d at 441 n. 2, but says nothing about the requirements of § 26. Jacobson does make clear that, as to the merits, within the antitrust context:
". . . the second branch of the Sonesta test requires no more than a showing of "sufficiently serious questions going to the merits to make them a fair ground for litigation.' 483 F.2d at 250."
The formula I distill from these authorities is that the plaintiffs in this antitrust action are entitled to a preliminary injunction if they bring themselves within either of the two branches of Sonesta ; and, in so doing, demonstrate a substantial threat of immediate irreparable harm.
I hold that plaintiffs have made the requisite showings.
A. The Threat of Irreparable Harm to the NASL and Its Members.
I conclude that the NASL and its plaintiff clubs have made a sufficient showing of a threat of irreparable harm, should the NFL proceed to enact the proposed amendment or otherwise attempt to enforce the cross-ownership ban, to satisfy that requirement of the applicable standards. To appreciate the nature and immediacy of the harm, some background discussion is necessary.
The NASL is a relative newcomer to the ranks of professional team sport leagues in America, having been established in 1968. On the basis of the undisputed factual recitations in NASL Commissioner Woosnam's affidavit, I find that the ten year history of the NASL has been one of struggle for financial security, franchise stability, and public recognition. Although the 1978 soccer season was the most successful in NASL history, only one of the 28 NASL franchises is expected to show a profit for that year; the remaining teams suffered operating losses, which in one instance ran as high as $ 1.5 million. However, for the first time in some ten years, the NASL has negotiated major television network coverage for its 1979 season. Commissioner Woosnam asserts that such television coverage is vital to the NASL in two respects: first, network television exposure generates fan interest which leads to increased attendance at games and increased gate receipts; second, a network contract provides direct revenues for the financially pressed NASL clubs. The Commissioner points out that for the NASL to retain and expand such television coverage, the major networks must be convinced "that the NASL is a stable and successful league"
with a bright economic future.
An important element of stability for the NASL has been furnished by individuals or families who own member soccer clubs, and also own NFL football clubs. Perhaps the foremost among these "cross-owners" is Lamar Hunt of Dallas, Texas, a sporting world legend in his own time. Hunt, as owner of the Kansas City Chiefs football team, was in the early 1960's one of the founders of the American Football League, subsequently merged with the NFL. Hunt is now chairman and sole owner of the NFL Kansas City franchise. Hunt also is a part owner of the Chicago Bulls of the National Basketball Association, and the founder of the World Championship Tennis circuit. In 1967 Hunt purchased a Dallas soccer franchise which, in 1968, became the NASL's Dallas club, called the Dallas Tornado. Woosnam's affidavit pays eloquent and, in my judgment convincing, tribute to the past and continuing importance to the struggling NASL of Hunt's presence and participation.
In addition to Mr. Hunt, the present NASL and NFL cross-owners include two well-known sports families whose participation in the NASL has contributed in some measure to its stability. The Robbie family is a case in point. Elizabeth Robbie is the owner and managing general partner of the NASL's Fort Lauderdale Strikers franchise; her husband, Joe Robbie, is the managing general partner and principal owner of the NFL's Miami Dolphins franchise; their son, Tim, serves as the Strikers' public relations director. Mrs. Robbie's NASL involvement has increased from that of a limited partner in 1973 to managing general partner in 1976, a position she assumed "to preserve her investment when all of the remaining general partners resigned from the partnership."
The Robbies have thus provided an NASL club with crucial capital and sports entrepreneurial skill, and, according to Commissioner Woosnam, have "dramatically turned around the prospects for the NASL's Fort Lauderdale franchise."
Another cross-owning family is the Nordstroms of Seattle. They present a unique situation in that family members had a prior NASL investment when, in 1975, an entity owned by the Nordstrom Family Partnership was awarded the new NFL Seattle franchise. Commissioner Woosnam asserts, and the NFL does not seriously dispute, that the Nordstroms' soccer success "paved the way for their entry into the NFL."
A fourth instance of NASL/NFL cross-ownership is presented by William Bidwell, an owner of the NFL St. Louis Cardinals and the holder of a 3 percent interest in the NASL California Surf.
We now consider the effect of the NFL's proposed amendment upon this presently existing cross-ownership. The amendment was prefaced by a series of four resolutions enacted by the NFL in 1967, 1972, 1973 and 1976, the texts of which are reproduced in the margin.
While these resolutions condemned in principle certain species of cross-ownership, no effort was made to enforce divestiture of such cross-ownership as existed. The 1967, 1972 and 1973 resolutions said nothing about divestiture. The 1976 resolution contented itself was calling upon those NFL owners holding an interest in another major team sport to "use best effort(s) to dispose of current holdings." No sanctions were imposed for failure to do so, and it does not appear that any divestitures in fact occurred. While the 1967 resolution "instructed" counsel for the league to draft "appropriate amendments to the Constitution and By-Laws," the record does not reveal any action in response to those instructions. "NFL Resolutions Concerning Cross-Ownership
Now an amendment to the by-laws is proposed. Its provisions form the subject matter of this action. The amendment is also reproduced in the margin.
Its terms would expand the scope of the June 16, 1976 resolution currently in effect in three important respects. Similar to the 1976 resolution, it would prohibit an NFL "control person" from Acquiring any interest in a competing major league team sport, defined to include baseball, basketball, hockey and soccer. The amendment, however, would significantly expand the class of persons subject to the prohibition. With respect to the Retention of a present cross-ownership interest, the amendment would replace the resolution's "best effort to dispose" requirement with a flat prohibition. Finally, the amendment would set a definite date February 1, 1980 for divestiture of cross-ownership holdings, and would authorize substantial financial penalties and ultimately, ouster from the NFL, for violation of the cross-ownership ban after that date.
If the amendment takes effect, all four of the present cross-ownership situations discussed Supra would be affected. That is because the amendment, going beyond the bounds of the resolution, embraces family members of NFL club owners; thus the soccer interests of Mrs. Robbie and the Nordstrom family would be condemned. In consequence, passage of the amendment would require Hunt, the Robbies, Bidwell, and arguably the Nordstroms,
to divest themselves of their interests in their NASL clubs. Bidwell's soccer interest is minor, but Hunt and Mrs. Robbie control the Dallas and Miami soccer clubs, and the Nordstroms' interests in the Seattle club are substantial.
To meet a divestiture deadline of February 1, 1980, it is reasonable to assume that the affected NASL owners would have to begin sales negotiations now. The sale and purchase of a major sports franchise is a considerable undertaking.
I also find, on the basis of NASL Commissioner Woosnam's affidavit, that as a consequence of the NASL's continuing battle for economic stability the league is "experiencing a significant degree of change in both the ownership and location of its franchises," so that "before the beginning of the NASL's 1979 playing season, controlling interests in as many as five NASL clubs are likely to be sold."
In those circumstances, the NASL has a vital interest in attracting potential new investors. The affidavits reveal, however, that the mere prospect of the NFL's proposed amendment has had a chilling effect upon presently football-oriented investors who might otherwise favorably consider ownership of an NASL franchise.
These factors combine to establish the NFL cross-ownership ban as a source of harm to the NASL sufficiently grave and immediate to satisfy Second Circuit and Clayton Act Standards. Loss of the stabilizing Hunt, Robbie and Nordstrom presences
would be injurious in itself. The forced addition of three franchises to an already burdened market would have an obviously depressing influence, particularly when viewed in combination with the chilling effect of the ban upon potential new investors. I am not persuaded by the defendants' argument that the present cross-owners could elect to retain their NASL interests and divest themselves of their NFL holdings. According to Woosnam
the current value of an NASL franchise is $ 2 million and that of an NFL franchise in excess of $ 30 million. A cross-owner is not likely to abandon the latter for the former.
I find that plaintiffs have made a sufficient showing of immediate and irreparable harm to satisfy that requirement of a preliminary injunction.
B. The Merits.
On the merits, the question that arises is whether the cross-ownership ban is open to serious challenge on antitrust grounds.
With respect to the general applicability of the Sherman Act to the facts of this case, it is well-settled that the business of professional football is subject to antitrust scrutiny, Radovich v. NFL, 352 U.S. 445, 77 S. Ct. 390, 1 L. Ed. 2d 456 (1957); Smith v. Pro Football, Inc., 193 U.S.App.D.C. 19, 593 F.2d 1173 (1978) Reprinted in 1978 BNA ATTR No. 889 at E-1 (Nov. 16, 1978); Mackey v. NFL, 543 F.2d 606 (8th Cir. 1976), Cert. denied, 434 U.S. 801, 98 S. Ct. 28, 54 L. Ed. 2d 59 (1977); Kapp v. NFL, 390 F. Supp. 73 (N.D.Cal.1974), and there is no serious dispute but that enactment of the proposed by-law amendment would constitute an agreement among the NFL and its member teams sufficient to satisfy the "contract, combination . . . or conspiracy" language of section 1 of the Sherman Act, 15 U.S.C. § 1. Denver Rockets v. All-Pro Mgmt., Inc., 325 F. Supp. 1049, 1062 (C.D.Cal.1971); Kapp v. NFL, supra, 390 F. Supp. at 81; U. S. v. NFL, 116 F. Supp. 319, 321 (E.D.Pa.1953). Cf. Associated Press v. U. S., 326 U.S. 1, 11-12, 65 S. Ct. 1416, 89 L. Ed. 2013 (1945) (bylaws of association in and of themselves a contract in restraint of trade).
Plaintiffs contend that the proposed cross-ownership ban constitutes an unlawful conspiracy or agreement among the NFL and its member clubs to deprive a competitor, the NASL, of a necessary competitive resource sports entreprenurial know-how and capital by eliminating a fertile source of that resource, to wit, NFL owners. Plaintiffs argue that the cross-ownership ban constitutes a classic group boycott, Per se unlawful under the Sherman Act, e.g., Klor's Inc. v. Broadway Hale Stores, Inc., 359 U.S. 207, 79 S. Ct. 705, 3 L. Ed. 2d 741 (1959); Associated Press v. U. S., 326 U.S. 1, 65 S. Ct. 1416, 89 L. Ed. 2013 (1944); Fashion Originators Guild v. F. T. C., 312 U.S. 457, 61 S. Ct. 703, 85 L. Ed. 949 (1940); Drayer v. Krasner, 572 F.2d 348 (2d Cir. 1978), or at best, a restraint of trade which must fall as unreasonable when tested under the rule of reason. See generally, National Soc. of Prof. Engineers v. U. S., 435 U.S. 679, 98 S. Ct. 1355, 55 L. Ed. 2d 637 (1978); Standard Oil Co. v. U. S., 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619 (1911); Smith v. Pro Football, Inc., supra ; Mackey v. NFL, supra. For the reasons that follow, I conclude that the Per se rule of illegality usually applied to "horizontal" group boycotts is inapplicable to the concerted action at issue here, but that plaintiffs have raised sufficiently serious litigable questions going to the merits as to satisfy the second prong of the preliminary injunction test.
In his comprehensive analysis of boycott caselaw, Professor L. A. Sullivan limits the concept of the "classic group boycott," horizontal in nature, which is condemned as Per se unlawful under the Sherman Act:
"If the Per se rule respecting boycotts is to become coherent, we must recognize that it applies only where competitors engage together to inhibit others with whom they compete by depriving those others of elements needed in the competitive context." L. A. Sullivan, Antitrust p. 259.
The Second Circuit in Oreck Corp. v. Whirlpool Corp., 579 F.2d 126, 131 (2d Cir. 1978), signalled its approval of the limitations Sullivan suggests upon the Per se rule respecting boycotts (see note 17, Infra ); as did the District of Columbia Circuit in Smith v. Pro Football, Inc., supra, a case which considered the validity of the NFL player draft.
The Supreme Court has had occasion recently to observe that "the (boycott) decisions reflect a marked lack of uniformity in defining the term . . . express(ing) no opinion, however, as to the merits of any of (the proffered) definitions." St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531, 542 and n. 14, 98 S. Ct. 2923, 2930 and n. 14, 57 L. Ed. 2d 932 (1978). The Court quoted its prior decision in FMC v. Svenska Amerika Linien, 390 U.S. 238, 250, 88 S. Ct. 1005, 19 L. Ed. 2d 1071 (1968), to the effect that " "(under) the Sherman Act, any agreement by a Group of competitors to boycott a particular buyer or group of buyers is illegal Per se,' " Id. (former emphasis added), and concluded that "(whatever) other characterizations are possible, ( ) petitioners' conduct may be viewed as "an organized boycott,' Fashion Guild v. Trade Comm., 312 U.S. 457, 465, 61 S. Ct. 703, 85 L. Ed. 949 (1941) . . . (in that petitioner) induced Its competitors to refuse to deal on any terms with its customers." Id. at 2931 (emphasis added). The Supreme Court's focus in the St. Paul case appears to have been on whether the members of the boycotting group were competitors Inter se, rather than on whether their action was aimed at harming competitors. In this sense, the Supreme Court's view of the classic group boycott may be somewhat broader than Professor Sullivan's, but under either approach a crucial element is agreement among competitors.
The problem with applying the "classic group boycott" label to the facts of this case lies in the peculiar relationship among the NFL and its member clubs. It is by now a well-recognized principle of the relevant caselaw (and the instant record does not demonstrate otherwise) that the members of a professional team sports league are more like "economic joint venturers" than competitors Inter se. E. g., Smith v. Pro Football, Inc., supra; Mackey v. NFL, supra; Levin v. N. B. A., 385 F. Supp. 149 (S.D.N.Y.1974); San Francisco Seals, Ltd. v. N. H. L., 379 F. Supp. 966 (C.D.Cal.1974). This is not a case where sports league members in competition with each other, e.g., for the services of players concertedly impose restraints on those players, E. g., Smith v. Pro Football, Inc., supra. In short, because under these facts, the NFL teams are not economic competitors among themselves, their action does not fit the classic group boycott definition, at least as that has been articulated by Professor Sullivan.
There is a substantial degree of judicial recognition, in antitrust cases, that the business structure of league team sports is unique. Smith v. Pro Football, Inc., supra; Kapp v. NFL, 390 F. Supp. 73, 79-81, 88-89 (N.D.Cal.1974); Philadelphia World Hockey Club, Inc. v. Philadelphia Hockey Club, Inc., 351 F. Supp. 462, 503-4 (E.D.Pa.1972); Flood v. Kuhn, 316 F. Supp. 271, 273-6 (S.D.N.Y.1970), Aff'd., 443 F.2d 264 (2d Cir. 1971), Aff'd., 407 U.S. 258, 92 S. Ct. 2099, 32 L. Ed. 2d 728 (1972); Molinas v. National Basketball Association, 190 F. Supp. 241, 243-4 (S.D.N.Y.1961); United States v. National Football League, 116 F. Supp. 319, 323-6 (E.D.Pa.1953); State of Milwaukee v. Milwaukee Braves, 31 Wis.2d 699, 144 N.W.2d 1, 10 (1966). These authorities indicate that the NFL should not be regarded as an association of economic competitors attempting to shield concerted anticompetitive behavior behind a joint venture facade.
Cf. United States v. Topco Associates, 405 U.S. 596, 92 S. Ct. 1126, 31 L. Ed. 2d 515 (1972). While neither the able presentations of counsel nor the Court's own research has uncovered a case dealing with the type of restraint at issue here, so that the lawfulness of the NFL's cross-ownership ban poses a question of first impression, I am presently persuaded that the NFL's structure, its particular business needs, and the lack of judicial familiarity with this type of restraint, combine to call for application of "rule of reason" principles to test the legality of the cross-ownership ban.
Of course, the joint venture nature of the NFL does not pose an insurmountable barrier to plaintiffs' case. Robertson v. NBA, 67 F.R.D. 691, 694 n. 3 (S.D.N.Y.1975). See generally, Timken Roller Bearing Co. v. U. S., 341 U.S. 593, 598, 71 S. Ct. 971, 95 L. Ed. 1199 (1951). It is not a prerequisite to antitrust liability that "co-conspirators" be competitors of one another. E. g., Tondas v. Amateur Hockey Ass'n, 438 F. Supp. 310 (W.D.N.Y.1977); DuPont Glore Forgan Inc. v. A. T. & T. Co., 437 F. Supp. 1104 (S.D.N.Y.1977); Diehl & Sons, Inc. v. International Harvester Co., 426 F. Supp. 110 (S.D.N.Y.1976). Though united in a joint venture, the NFL members are discrete business entities individuals, partnerships and corporations whose concerted action can have antitrust implications, Robertson, supra; Levin v. NBA, 385 F. Supp. 149, 152 (S.D.N.Y.1974); San Francisco Seals v. NHL, 379 F. Supp. 966, 968, 970-71 (E.D.Cal.1974); United States v. National Football League, supra.
Viewing the cross-ownership ban in the light of the rule of reason, the decisive issue, recently articulated by the Supreme Court in National Soc. of Professional Engineers v. U. S., supra, is "whether the challenged agreement is one that promotes competition or one that suppresses competition." 435 U.S. at 691, 98 S. Ct. at 1365. Crucial to this evaluation is inquiry into "the facts peculiar to the business, the history of the restraint, and the reasons why it was imposed," to the end that the court may "form a judgment about the competitive significance of the restraint." In short, I must ultimately analyze the purpose and effect of the cross-ownership ban, Oreck Corp. v. Whirlpool Corp., supra, 579 F.2d at 133, and determine whether on balance its anticompetitive effects outweigh its pro-competitive benefits. See e.g., Professional Engineers, supra; Continental T. V. v. GTE Sylvania, Inc., 433 U.S. 36, 49-51, 97 S. Ct. 2549, 53 L. Ed. 2d 568 (1977). Plaintiffs are entitled to a preliminary injunction if, within the context of that controlling issue, they have "raised questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberate investigation." Jacobson, supra, 548 F.2d at 442.
The NASL plaintiffs perceive two principal anticompetitive effects of the cross-ownership ban. First, they view the limited number of individuals in the United States with sufficient wealth, interest, time and entrepreneurial skills to operate a major sports franchise effectively as a decidedly limited market, of which the present NFL members constitute a significant part. Plaintiffs claim that the cross-ownership ban obstructs the NASL from competing in that market, since under its terms present cross-owners are under pressure to divest themselves of NASL franchises, and new prospects cannot be approached if they are NFL owners, present or potential. Secondly, plaintiffs argue, this anticompetitive effect leads directly to another, since the coercions and restraints placed upon present and potential NASL owners serve to "undermine the stability, credibility and ability of the NASL to compete successfully with other sports, including the NFL" in the broader market for the public's entertainment dollar and leisure time.
Defendants dispute the accuracy of these perceptions. They point out that investors and potential investors in NASL franchises come from many walks and stations of life, so that the limited market of wealth and skill described by plaintiffs is illusory. The NFL scoffs at the dire anticompetitive effect visualized by the NASL, paraphrasing the plaintiffs to say that "their dynamically growing venture would collapse in a trice if two or three of its 24 franchises change ownership contrary to the league's wishes between now and 1980."
Defendants proclaim the cross-ownership ban to be procompetitive in overall effect, primarily because it inhibits the "creeping merger of the two leagues through joint ownership."
The issues presented are interesting, complex and to a degree novel, such as the NASL's perception of wealthy, sportsminded individuals as components of a market for which rival leagues compete. One suspects that until now Mr. Hunt had thought of himself as a competitor, and not a commodity. At times the parties' arguments cut both ways. Thus defendants' characterizations of the cross-ownership ban as procompetitive, because it would prevent merger of the two leagues through "joint ownership," does not wholly square with their downgrading of the economic importance of the entrepreneurial sub-market: if NASL has so many and so wide a variety of investors to choose from, why is a cross-ownership ban necessary to prevent a "creeping merger" of the NASL and NFL?
Measured by the rule of reason and its quintessential issue as articulated in National Society of Professional Engineers the promotion or suppression of competition it is evident that the case at bar presents serious questions forming a fair ground for litigation, including the discovery procedures now in progress. If no prior case delineates sports entrepreneurs as a market with which antitrust law is properly concerned, no case holds that the concept is too fanciful to have validity. The precise boundaries of that market, in the case at bar, present substantial issues of fact. The cross-ownership ban would limit the options of (a) NFL owners and their family members who also own an NASL franchise or contemplate such an interest; and (b) NASL franchises seeking to interest such individuals as investors. The restraints attendant upon such limitations of choice fairly implicate the antitrust laws. United States v. New Orleans Insurance Exchange, 148 F. Supp. 915, 920 (E.D.La.1957), Aff'd, 355 U.S. 22, 78 S. Ct. 96, 2 L. Ed. 2d 66 (1957); United States v. Insurance Board of Cleveland, 188 F. Supp. 949, 955 (N.D.Ohio 1960). I find no meaningful relationship between the proposed by-law amendment forming the subject matter of the instant case and the rejection by a professional basketball league of certain individuals for franchise ownership in Levin v. National Basketball Association, 385 F. Supp. 149 (S.D.N.Y.1974), upon which defendants rely. That rejection in Levin was Ad hoc, ad hominem, and, as Judge Owen properly held, quite without antitrust implications. Such implications abound in the case at bar.
It is difficult for defendants to deny any anticompetitive intent for the cross-ownership ban, in the face of Commissioner Rozelle's explanatory statement of June 28, 1978 to the NFL owners, which included the following discussion as a reason for the ban:
"The NFL's success depends on fan interest and loyalty. The League competes with other major team sports for that interest and loyalty, as well as for gate receipts, television revenues, advertising dollars, and media coverage. Connections with NFL personnel may well enhance these competing team sports, both in fact and in the public's perception, at the expense of the NFL."
In sum, there are present in this case merits issues of sufficient doubt and moment to satisfy the Sonesta and Jacobson tests.
C. The Balance of Hardships.
No extended discussion is necessary to demonstrate that the balance of hardships tips in favor of plaintiffs. The adverse effects to the NASL attendant upon immediate implementation of the cross-ownership ban have been considered Ante. Those effects may not be capable of precise calculation, but the potential is real. By way of contrast, the NFL points to no factor indicating that it will be harmed if a policy declared in 1967, but not sought to be enforced until 1978, is kept on the bench during the pendency of this litigation.
The parties have devoted some energy to debating whether the granting of a preliminary injunction to plaintiffs would preserve or disturb the Status quo. Clearly it is the former. The NFL made no meaningful efforts to enforce the cross-ownership ban, first declared in a resolution in 1967, until the 1978 proposed amendment, with its forced divestiture and Draconian penalties for non-compliance. Transforming a toothless tabby into a sabre-tooth tiger is no way to preserve the Status quo. The NFL's serene portrayal of cross-owners, cheerfully and without resentment, exercising their best efforts to divest themselves of other interests even prior to the proposed amendment, does not withstand analysis. Thus Hunt has expressed concern at the timing of an enforced divestiture.
For the purposes of this motion, the Court need not accept or reject plaintiffs' contention that the NFL's proposal to implement the cross-ownership ban at this time stems solely from anticompetitive animus toward the NASL, just as the latter begins to succeed. I recognize that the NFL asserts quite different motivations.
Resolution of this and other fact issues must await trial. It is sufficient for the present to say that the NFL's recently declared intent to implement a cross-ownership ban disturbs the Status quo in such a manner as to tip the balance of hardships in favor of plaintiffs; and that the other requisite elements are also established, thus entitling them to a preliminary injunction.
The foregoing constitutes the Court's Findings of Fact and Conclusions of Law pursuant to Rule 52(a), F.R.Civ.P.
A preliminary injunction will issue, restraining the NFL and its member clubs, pending the final resolution of this case, from implementing by by-law amendment or otherwise its cross-ownership ban.
The giving of security by plaintiffs is referred to both by Rule 65(c) and 15 U.S.C. § 26. The present motion papers do not address this issue. Counsel should do so in connection with settling the order.
Counsel for plaintiffs are directed to settle an order and form of injunction on five (5) days' notice.