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TOPPS CHEWING GUM, INC. v. MAJOR LEAGUE BASEBALL P

August 1, 1986

TOPPS CHEWING GUM, INC., Plaintiff,
v.
MAJOR LEAGUE BASEBALL PLAYERS ASSOCIATION, Defendant



The opinion of the court was delivered by: CONNER

OPINION AND ORDER

This case concerns the commercial currency of youth: baseball trading cards, those familiar 2 1/2 inch by 3 1/2 inch cards with the name and picture of a major league baseball player on the front, and his career statistics and personal information on the back. Plaintiff, Topps Chewing Gum, Inc. ("Topps"), is the major manufacturer and marketer of such cards and other products containing pictures of major league baseball players. Its products are sold either alone or in combination with bubble gum pursuant to license agreements between Topps and individual baseball players. Defendant, the Major League Baseball Players Association ("the MLBPA" or "the Players Association"), is a labor organization that represents major league baseball players. The MLBPA has encouraged players not to renew their license agreements with Topps, but instead to transfer their publicity rights to the MLBPA so that it can negotiate license agreements with Topps and other baseball product manufacturers on behalf of all major league players.

Topps alleges that the MLBPA has thereby instigated a group boycott in violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1982), and has combined to monopolize major league baseball players' publicity rights in violation of section 2 of the Sherman Act, 15 U.S.C. § 2 (1982). Topps further alleges that the MLBPA has tortiously interfered with Topps' contractual relationships with major league baseball players.

 This matter is now before the Court on a variety of motions. Topps has moved for partial summary judgment on the ground that the MLBPA's actions constitute per se violations of the antitrust laws. The MLBPA has cross-moved for summary judgment on the ground that Topps has failed to make out an antitrust violation. Finally, Topps has moved for a mandatory preliminary injunction directing the MLBPA to license to Topps those rights Topps currently holds under contracts with individual players that will expire on December 31, 1986.

 For the reasons set forth below, Topps' motion for partial summary judgment, and the MLBPA's cross-motion for summary judgment are denied. Topps' motion for a preliminary injunction is also denied.

 Background

 The parties are in agreement with respect to the following facts:

 Topps' Licensing Program and Player Contracts

 For more than 20 years, Topps has been the dominant manufacturer and marketer of baseball trading cards. Over the years, Topps has developed and implemented an extensive program of signing individual contracts with thousands of minor and major league baseball players. It currently has contracts in force with all but a handful of the active major league players. Under these contracts, a player grants Topps an exclusive right to publish the player's name, picture, signature, and biographical information on products "to be sold either alone or in combination with chewing gum, candy and confection, or any of them." Exhibit 3 to Affidavit of Daniel L. Carroll, Esq. in Support of Plaintiff's Motion for partial Summary Judgment [hereinafter cited as "Carroll Aff."]. The contracts are standardized form agreements, and a player either accepts the contract or rejects it. Topps does not negotiate the terms of the contracts on a player-by-player basis.

 Topps typically solicits ballplayers to enter into these contracts while they are in the minor leagues. However, the term of the contract is five years, beginning, in effect, when the player reaches the major leagues. Thus, the contracts often have a duration of more than ten years: a player's entire minor-league career plus his first five major league seasons. Moreover, it has been Topps' practice to attempt to obtain extensions of the contracts for two-year intervals so that each player is always under contract for five major league baseball seasons in advance.

 The compensation terms of the contracts have remained unchanged since 1975. A player receives $5 when he signs his initial contract. For every season in which he is a member of a major league club or in which Topps uses his picture, a player receives an advance of $250 against his pro rata share of a royalty pool computed at 8% of Topps' first $4 million in net sales, and 10% of Topps' net sales in excess of $4 million. Pursuant to an agreement made with the MLBPA in 1968, Topps pays any royalties owing to major league players to the MLBPA for distribution in accordance with the MLBPA's standard procedure for distributing license revenue.

 Topps contends that its ability to obtain player contracts and extensions is crucial to its success. The contracts "constitute the carefully developed mechanism whereby Topps is able to produce and market series and sets of baseball cards and related products featuring the pictures and playing records of established major league baseball players." Affidavit of Joel Shorin in Support of Plaintiff's Motion for Partial Summary Judgment P 13. In order to assure its continued ability to obtain such contracts, Topps has included in the contracts a provision that prohibits players during the life of their contracts from granting a competing license. The provision provides that the player

 
shall not during the term of this Agreement or any extension or renewal thereof, enter into any agreements with others with reference to, or involving the subject or the rights granted herein, nor . . . grant to others the rights granted to Topps hereunder, or any rights similar thereto, whether such grant of rights to others be for the term of this contract or any part thereof, or whether they be for a time commencing after the expiration of this contract.

 Exhibit 3 to Carroll Aff. The scope of these contracts, Topps' practice in procuring them, and the restriction against competing grants have been repeatedly upheld against attacks in previous litigation. See, e.g., Fleer Corp. v. Topps Chewing Gum, Inc., 658 F.2d 139 (3d Cir. 1981), cert. denied, 455 U.S. 1019, 72 L. Ed. 2d 137, 102 S. Ct. 1715 (1982); Topps Chewing Gum, Inc., 67 F.T.C. 744 (1965).

 The MLBPA's Involvement in Licensing Players' Rights

 In 1966, the MLBPA began to license the publicity rights of its members for use on a group basis as one of its activities. The MLBPA derives its ability to license baseball players' publicity rights from so-called Commerical Authorization Agreements signed by every major league baseball player. See Exhibit 10 to Carroll Aff. In those agreements, each player grants to the MLBPA the exclusive right to use his picture, name, and signature with other players on a group basis for a term of three years. See Exhibit 29 to Carroll Aff. However, since players do not sign Commercial Authorization Agreements until they enter the major leagues, those agreements do not cover rights that players have previously granted to Topps.

 In the early 1980's, the MLBPA began to grant licenses for player picture products that compete directly with those marketed by Topps. The MLBPA could not give Topps' would-be competitors the right to sell players' pictures "alone" or "in combination with chewing gum, candy and confection" -- Topps had already obtained exclusive assignments of those rights from individual players. The MlBPA could, however, sublicense to others the right to sell players' pictures in conjunction with various companion products it calls "premiums." Thus, the Players Association has licensed the Fleer Corporation to sell trading cards, stamps, stickers, and decals in combination with major league team logo stickers, the Leaf-Donruss Company to sell trading cards, stamps, stickers, and decals in combination with puzzle pieces which when assembled make a jigsaw puzzle of a Hall of Fame player, and the Optigraphics Corporation to sell lenticular action cards in combination with baseball trivia cards. There is some disagreement as to whether these companies pay higher royalties for their rights than Topps pays for its rights.

 The Relationship between Topps and the MLBPA

 For many years, the MLBPA has attempted to persuade Topps to pay more for its rights, but Topps has refused. In 1966, Marvin Miller, then executive director of the MLBPA, met with Joel Shorin, president of Topps, to discuss the terms of Topps' individual contracts with the MLBPA's members. Topps had no contractual relationship with the MLBPA, but Miller was concerned that Topps was not paying players enough for the rights it was receiving from them. At that time, Topps paid each player $5 when he signed the initial contract, and $125 for each season in which he was a member of a major league club or in which Topps used his picture. Topps paid no royalties.

 Miller argued that these terms were unfair, but Topps refused to modify them. In 1968, Miller reported his difficulties to the executive board of the MLBPA, and the board voted to recommend that MLBPA members cease renewing their individual contracts with Topps. The recommendation was accepted and very few players signed renewals with Topps.

 Thereafter, Miller and Shorin met again in an attempt to negotiate a solution to their differences. Miller demanded a uniform expiration date for all of Topps' contracts, an agreement that the MLBPA could at some point offer the rights held by Topps on a bid basis, a limitation on Topps' rights to sell baseball cards alone, and more money for the players. By late 1968, Topps and the MLBPA reached an agreement. Topps agreed to pay increased compensation to the players, including royalties, but did not accede to the MLBPA's demands for a uniform expiration date and the opportunity to offer the rights held by Topps on a bid basis. As mentioned above, Topps subsequently agreed to pay royalties owing to players under the individual player contracts to the MLBPA for distribution in accordance with its standard procedure for distributing license revenue.

 In 1973, Topps and the MLBPA extended the 1968 agreement for an additional five years so that it did not expire until 1981. However, beginning in late 1981, Miller renewed his attempts to obtain the concessions he was unable to win in 1968. Again, Topps rebuffed these demands.

 In December 1981, at a meeting of the MLBPA executive board, Miller reviewed the status of the relationship between the MLBPA and Topps. Among other things, Miller noted that since 1968 Topps had paid royalties to the Players Association, but that in negotiations for an extension of that agreement, "Topps had, thus far, offered a lesser royalty for exclusive rights to trading cards than had been negotiated with Fleer and Donruss for non-exclusive rights." Excerpts from Minutes of Executive Board Meeting on December 7-10, 1981, Exhibit 21 to Carroll Aff. The board's discussion culminated in a vote "that pending the results of further negotiations with Topps it's [sic] recommendation is that no player enter into or renew an agreement with Topps. Miller was directed by the Board to report on further developments in Spring Training." Id.

 According to Miller, the MLBPA believed that Topps' individual contracting system left the MLBPA with "no bargaining power," Miller Dep. Tr. at 137, Exhibit 6 to Carroll Aff., and that the "practical result" of the recommendation that players not sign with Topps -- if it resulted in the expiration of the individual contracts -- was that there would "be central negotiation" conducted by the MLBPA, id. at 164-65.

 According to Dan Quisenberry, a player who has been actively involved in MLBPA activities throughout his career and who, as the player representative for the Kansas City Royals, attended MLBPA board meetings for the past three years, one of the reasons for the recommendation that players not sign agreements or extensions with Topps was to permit the MLBPA to be in a position to negotiate with all potential licensees without having to worry about Topps' individual contracts. ...


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