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SHAYNE v. NHL

December 22, 1980

Neil T. SHAYNE, Plaintiff,
v.
NATIONAL HOCKEY LEAGUE et al., Defendants



The opinion of the court was delivered by: NEAHER

MEMORANDUM OF DECISION AND ORDER

This is an action for injunctive relief and recovery of $ 30,000,000 treble damages for business injuries allegedly sustained by plaintiff as a result of defendants' claimed violations of the federal antitrust laws. Following protracted pretrial proceedings, which finally occasioned a motion by defendants to dismiss the action for plaintiff's prolonged failure to prosecute and his disregard of orders of the court, the action proceeded to trial before the court without a jury in July 1979. The court's findings of fact and conclusions of law pursuant to Rule 52, F.R.Civ.P., follow.

The Parties and Claims

 Plaintiff is an attorney practicing in Nassau County, Long Island, and the surrounding metropolitan area, and is well known in the field of litigation. He has also engaged in other business ventures from time to time and has obtained financing through public stock offerings. The defendants are the National Hockey League ("NHL"), the member clubs which constitute the league, and individual principals associated with those clubs. The NHL itself is an unincorporated not-for-profit association organized under the laws of Quebec, Canada, and having its principal place of business and headquarters in Montreal, Canada. In reality the league is an association of individuals and firms engaged in conducting an organized schedule of professional hockey games in indoor arenas located in cities in the United States and Canada. Its affairs are managed by a Board of Governors composed of a principal officer or shareholder from each of the member clubs.

 Commencing in or about 1971, defendants are alleged to have monopolized the business of professional hockey and, in particular, conspired to prevent plaintiff from forming his own professional hockey club under the aegis of a newly organized rival league, the World Hockey Association ("WHA"). More specifically, it is plaintiff's claim that defendants foreclosed his threatened competition on Long Island by creating an NHL franchise for a new hockey club to play in the Nassau County Veterans Memorial Coliseum ("Coliseum"), then nearing completion, in which plaintiff was also seeking to install a proposed WHA hockey team. The defendants, denying any violation of the antitrust laws or conspiracy against plaintiff, contend that plaintiff's claims must be judged in light of the relatively undisputed developments in professional hockey over the years, the role of the Nassau County authorities in control of the Coliseum, and plaintiff's inability to meet their requirements for a professional sports program which would satisfy the demands of a sophisticated suburban market and assure the financial viability of the Coliseum as a public enterprise.

 The Business of Professional Hockey

 Professional hockey like other major sports is undoubtedly a business engaged in interstate commerce and subject to the federal antitrust laws. *fn1" As in the case of professional football and basketball, the advent of television stimulated widespread interest in ice hockey and created a growing demand for the establishment of professional hockey clubs in major cities throughout the United States and Canada. Thus the NHL, which was founded in 1917 and in 1965 had only six clubs (Boston, Chicago, Detroit, New York, Montreal and Toronto), announced a major expansion program in 1965 which doubled the number of clubs by granting franchises for teams in Oakland, Los Angeles, Minneapolis, Philadelphia, Pittsburgh and St. Louis. After the new teams began operating in 1967, a further expansion was announced in 1969 which brought the cities of Buffalo and Vancouver, Canada, into the NHL, making a total of fourteen clubs playing during the 1970 hockey season. The league's established policy was to expand in multiples of two clubs to provide for full scheduling, so that each member team would have another club to play at any one time.

 The expansion of the NFL was not simply a matter of authorizing the formation of new clubs. Large financial investments were required of the new franchisees in order to acquire the right not only to play with the established NHL teams under the NHL name but also to draft the requisite number of talented hockey players already under contract with the existing clubs. In 1967 each of the six new clubs had to pay the NHL a fee of $ 2,000,000 for those purposes. In 1969 Buffalo and Vancouver each had to pay a franchise fee of $ 6,000,000 for the right to enter the league and obtain players. These sums were distributed among the existing clubs to compensate them for the transfer of valuable players and were exclusive of other substantial costs of operating a new franchise such as, for example, indemnification of clubs for territorial infringement and claims of any minor professional leagues operating within the new franchisee's territory.

 NHL Expansion to Long Island

 In early November 1971 the Board of Governors of the NHL voted to grant franchises for two additional hockey clubs to begin play in the 1972-73 season, one to be located on Long Island and the other in Atlanta, Georgia. The decision to expand to Long Island gave rise to plaintiff's action, which was filed November 29, 1971.

 Although it is plaintiff's claim that the intent of the NHL action was to foreclose his competition as a proposed WHA franchisee in the New York metropolitan area, it is indisputable that the genesis of the NHL Long Island franchise began in 1968, some three years prior to the formation of the WHA. Its progenitor was Eugene Nickerson, then Nassau County Executive and a hockey fan. Nickerson was acquainted with defendant William M. Jennings, a New York attorney, who was president of the New York Rangers NHL hockey club and a member of the NHL Board of Governors. It was Nickerson who first informed Jennings that a major municipal sports arena, the Coliseum, was under construction in Nassau County and of Nickerson's desire to have an NHL hockey team and a National Basketball Association team playing there when it opened.

 In November 1970, Ralph Caso was elected Nassau County Executive, succeeding Nickerson in office on January 1, 1971. Like his predecessor, he was desirous of having major sports attractions for the Coliseum when it was completed. To accomplish that objective Caso obtained the assistance of William Shea, a New York attorney and sports figure, in the capacity of unpaid sports advisor for the new Coliseum. Shea was widely known for his success in bringing National League baseball back to New York and his representation of leading sports figures. He also had NHL connections as a director of a California corporation which owned the NHL Los Angeles Kings hockey team, whose president, Jack Kent Cooke, was a member of the NHL Board of Governors. Shea's mission for Nassau County was to provide advice and assistance in obtaining major league professional hockey and basketball teams in time for the projected opening of the Coliseum in late 1972.

 Shea lost no time in getting to work. In early December, 1970 before Caso assumed office Shea broached the subject to Jennings when they met at a Madison Square Garden sports event. Jennings initially was not in favor of a Long Island NHL team, fearing its effect upon his own New York Rangers whose territory included Long Island. Jennings suggested that the Rangers' farm club could play minor league teams in the Coliseum but Shea "was totally uninterested." Instead, as Jennings put it, "he got more forceful," saying " "I don't have to draw you a diagram as to the type of pressures that could be put on Madison Square Garden' " if Jennings did not support an NHL team for the Coliseum (Tr. 763).

 At trial, Jennings, who was called as a witness for plaintiff, testified that he construed Shea's remarks as a threat of possible litigation or a Nassau County citizens' boycott of Madison Square Garden. Whatever Shea meant, the desired effect was achieved. Jennings and defendant Irving Felt, then Chairman of the Board of Madison Square Garden Corporation, decided that the Garden should support an NHL team for the Coliseum provided the New York Rangers were indemnified in the sum of $ 5,000,000 for permitting another NHL franchise within their territory. On January 15, 1971, Jennings informed Shea of this decision and thereafter, during the first few months of 1971, discussed further expansion of the NHL with other members of the Board of Governors in an attempt to gain support for the proposal. Meanwhile, Shea sent material concerning Nassau County to NHL President Clarence F. Campbell and discussed with other NHL owners the possibility of a franchise on Long Island.

 Contemporaneously with Nassau County's interest in an NHL franchise, the owner of a new arena being constructed in Atlanta, Georgia was also pursuing a similar objective. In March 1971, Jennings visited Atlanta and was informed that the arena would be completed by 1972 and of the owner's desire to have an NHL team in time for the opening. Caso and Shea were aware of the Atlanta development and regarded it as favorable to the interests of Nassau County because of the NHL desire to avoid the scheduling problems created by having an odd number of teams.

 In early June 1971 the question of expansion was on the agenda for a Board of Governors meeting. The subject was deferred, however, because the meeting had already run its normal two-day course and Jennings did not feel secure about obtaining the necessary agreement. In late June, Jennings and Campbell visited the Coliseum site and met with Caso, Shea and other officials, all of whom pressed for a 1972 franchise. Shea understood that the NHL was receptive and that progress was being made. At the time of this meeting, neither Nassau County nor NHL officials had any knowledge of the existence of the WHA or of plaintiff.

 Formation of WHA and Entry of Plaintiff

 Although WHA was organized in California in June 1971, there was no public announcement until the middle of September when an article appeared in The New York Times which characterized the new league as a "threat" to the NHL. Plaintiff, however, learned of the WHA in or prior to July 1971, at which time he communicated with its representatives about the possibility of acquiring a WHA franchise.

 In late September 1971, plaintiff attended an owners' meeting in Los Angeles but limited his interest at that time to obtaining only an option to acquire a WHA franchise for the New York City metropolitan area, including Queens, Nassau and Suffolk Counties, and extending into New Jersey, Connecticut and Pennsylvania. Under the specific terms of the option, which was to expire January 1, 1972, plaintiff could acquire the entire WHA territory extending 100 miles from Columbus Circle in New York City, and including Hartford, Connecticut. For this he paid $ 5,000 of the total $ 25,000 purchase price of the option, with the balance to become due upon its exercise. To exercise the option, however, plaintiff was required to submit "to ...


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