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VKK CORP. v. NATIONAL FOOTBALL LEAGUE

June 22, 1999

VKK CORPORATION, VKK PATRIOTS, INC., VICTOR K. KIAM II, PLAINTIFFS,
v.
NATIONAL FOOTBALL LEAGUE, B & B HOLDINGS, INC., THE FIVE SMITHS, INC.; BUFFALO BILLS, INC., THE CHICAGO BEARS FOOTBALL BEARS CLUB, INC., CINCINNATI BENGALS, INC., CLEVELAND BROWNS FOOTBALL CO., DALLAS COWBOYS FOOTBALL, INC., PDB SPORTS INC., THE DETROIT LIONS, INC., THE GREEN BAY PACKERS, INC., HOUSTON OILERS, INC., INDIANAPOLIS COLTS, INC., KANSAS CITY CHIEFS FOOTBALL CLUB, INC., MIAMI DOLPHINS, LTD., MINNESOTA VIKINGS FOOTBALL CLUB, INC., NEW YORK FOOTBALL GIANTS, INC., NEW JETS FOOTBALL CLUB, INC., PITTSBURGH STEELERS SPORTS, INC., SAN DIEGO CHARGERS FOOTBALL CO., SEATTLE SEAHAWKS, INC., TAMPA BAY AREA NFL FOOTBALL, INC., PRO-FOOTBALL, INC., TOUCHDOWN JACKSONVILLE, LTD., AND TOUCHDOWN JACKSONVILLE, INC., DEFENDANTS.



The opinion of the court was delivered by: Milton Pollack, Senior District Judge.

DECISION

Preliminary

The plaintiffs in this case are Victor K. Kiam II, VKK Corporation and VKK Patriots, Inc. The plaintiffs owned a controlling interest in the New England Patriots, a football team located in Foxboro, Massachusetts, from October 1988 until May 1992.

The defendants in this case are certain member clubs of the National Football League including Jacksonville Jaguars, Ltd.,*fn1 and a non-member entity, viz., Touchdown Jacksonville Inc. ("TDJ Inc.") which was added by amendment of the complaint filed and served in 1998. The NFL and the defendant member clubs shall be referred to collectively as the "NFL."

On May 8, 1992, Kiam executed and delivered to the NFL a broad General Release of any claims plaintiffs might have against the NFL. This General Release specifically provided that plaintiffs released the NFL from any and all antitrust claims.

More than thirty months after he signed the general release, Kiam filed the instant lawsuit, in which the original complaint alleges that the NFL defendants including the defendant Jacksonville Jaguars, Ltd. illegally conspired to block plaintiffs from relocating the Patriots to an area outside New England.

The instant suit was predicated on the claim that the Release was invalid as having been obtained while Kiam was under economic duress caused by the NFL. Extensive discovery was undertaken involving over thirty witnesses examined commencing on dates in 1995 and continuing from dates in 1998 and 1999 until as late as May 24, 1999. A motion by defendants for summary judgment was denied. The issue on the Release was then severed for a separate preliminary jury trial.

After a full trial, a jury rejected Kiam's economic duress claim. The jury found that the plaintiffs were not under economic duress caused by the NFL and its member clubs when plaintiffs executed and delivered the General Release. On April 16, 1999, this Court directed entry of a final judgment against the plaintiffs on the economic duress claim.

After entry of judgment on the duress claim, Kiam pressed forward on a theory that the Release was "part and parcel" of a conspiracy and was invalid for that reason, and that he had received no consideration for the Release. The defendants responded with a renewal of their motion for summary judgment delineating separate issues.

After identifying and briefing of those motions and affording plaintiffs a final opportunity for further depositions of persons not theretofore deposed, the Court scheduled a hearing,*fn2 pursuant to Federal Rule of Civil Procedure 43(e), "to assay the alleged probative evidence of the plaintiffs . . ., to narrow the [remaining] controverted issues[, if any,] to triable matters and to dispose of matters unsupported by admissible evidence." Argus Inc. v. Eastman Kodak Co., 612 F. Supp. 904, 908 (S.D.N.Y. 1985), aff'd, 801 F.2d 38 (2d Cir. 1986), cert. denied, 479 U.S. 1088, 107 S.Ct. 1295, 94 L.Ed.2d 151 (1987). Plaintiffs' counsel were informed in advance of the hearing that they would be expected to call live witnesses and to offer specific admissible evidence in support of their position that they were entitled to a trial on the remaining issues assertedly raised by plaintiffs' claims. The Court set aside two days for the evidentiary hearing.*fn3

On May 27, 1999, the first day set aside for the hearing, plaintiffs' counsel appeared but offered no live witnesses. They did not call to the stand any witness who allegedly had knowledge and specific admissible testimony regarding the issues that plaintiffs claimed to be in dispute. They did not call Kiam; they did not call any NFL or club executives who were within subpoena range; they did not call any third party witnesses to whom they had previously attributed knowledge of the alleged conspiracy or of plaintiffs' alleged injury; nor did plaintiffs call their alleged economic expert, who had submitted an affidavit purporting to support one of their opposition papers. Instead, plaintiffs' counsel merely identified prior deposition and testimonial excerpts and made a brief argumentative statement on the legal issues and asserted a request which the Court deemed dilatory for new discovery pursuant to Rule 56(f).

Despite the opportunity afforded by the extensive discovery previously undertaken in this case over years, and the full jury trial on the duress issue, the plaintiffs failed to provide specific admissible facts to show that there is a genuine issue remaining for trial.

The Court finds that the plaintiffs' reference to excerpts of prior inconclusive deposition testimony has failed to set forth the required specific probative facts showing that there is a genuine issue for trial, and the plaintiffs' failure to produce witnesses with specific probative evidence at the Rule 43(e) proceeding as well as the informative state of the record in the jury trial on the Release, preclude the claims asserted herein. Accordingly, the NFL motions for summary judgment based on the scope of the Release and on the part and parcel theory and on all the plaintiffs' claims asserted in the first amended complaint as well as the motion based on the statute of limitations addressed to the new party added to the case in 1998 will be granted. Costs to the NFL to be separately determined and entered at the foot of the judgment hereon. The counterclaims are reserved herefrom.

EVIDENCE AS TO WHICH THERE IS NO GENUINE MATERIAL ISSUE TO BE TRIED

Kiam's Business Experience and Advisers

1. Kiam was an experienced businessman who was advised throughout the relevant period by sophisticated and experienced lawyers, accountants, and other business advisers. See Amended Joint Pretrial Order, Statement of Undisputed Facts ¶ 26.

2. When Kiam acquired the Patriots in October 1988, he was Chairman, Chief Executive Officer, and owner of all of the voting stock of Remington Products, Inc., the world's second largest manufacturer of electric razors. He also owned other businesses. See Amended Joint Pretrial Order, Statement of Undisputed Facts ¶ 3.

Structure of the NFL

3. The NFL consists of 30 independently owned member clubs who co-produce the entertainment product "NFL football." Tr. at 839-843*fn4 (Paul Tagliabue), 358-359 (Norman Braman).

4. The NFL member clubs jointly produce an annual season of NFL games leading to a series of playoff games that culminate each year in the determination of a Super Bowl champion. Tr. at 840 (Tagliabue).

5. It is the Commissioner's responsibility, inter alia, to oversee the business operations of the League, to represent the League and the clubs in dealings with third parties, and to ensure the integrity of the games and of the competition on the football field itself. Tr. at 843-844 (Tagliabue).

6. The NFL Constitution and Bylaws is the basic agreement among the member clubs, which along with all resolutions passed by the members, and policies and procedures implemented by the Commissioner, set forth the structure and organization of the League, as well as some of the "ground rules" the clubs will follow in conducting their joint business. Tr. at 841-843 (Tagliabue).

7. As early as May 1989, League procedures provided that approval of a sale "may be conditioned on such additional terms as the Commissioner, the Finance Committee, or the membership deems appropriate." NFL Document Entitled "Procedures for Prospective Sellers. . . ." Dated May 24, 1989 (Exhibit 4 in Defendants' [1995] Motion for Summary Judgment on Plaintiffs' Claims).

8. NFL member clubs share approximately 90% of the total revenues earned by the League and its teams. Tr. at 845 (Tagliabue).

9. The NFL negotiates with each network broadcasting NFL games national television contracts on behalf of all NFL clubs. Tr. at 262 (Kiam).

10. The national television revenues are shared equally among each of the member clubs, regardless of whether they are located in a metropolitan area such as New York, or in a smaller community such as Green Bay, Wisconsin. Tr. at 262 (Kiam), 844-845 (Tagliabue).

11. Between fifty and sixty percent of the revenues earned by the NFL member clubs and shared equally among them are derived from the NFL's contracts with its national television broadcasters. Tr. at 845 (Tagliabue).

12. The location of NFL clubs is a factor that affects the success of all of the clubs collectively because location affects attendance and television viewership. Tr. at 847-88 (Tagliabue).

13. Television viewership could suffer if an NFL team moved out of a major market such as the Boston area. Pinchbeck Dep. at 97 (Plaintiffs' Exhibit 14 in Support of Declaration of Mark Levinstein, Opposing Summary Judgment On The Merits). Tr. at 358 (Braman).

14. NFL football is a successful product because, inter alia, the quality of the competition on the field is very close, and because it involves teams that represent their communities in a way that arouses competition and rivalry against the other teams. Tr. at 840 (Tagliabue).

15. The Super Bowl is commonly the number one rated program on television. Tr. at 840-841 (Tagliabue).

16. Article 4.3 of the NFL Constitution and By-laws prohibits any club from "transfer[ring] its franchise or playing site to a different city" without first obtaining League approval. 1988 NFL Constitution and By-laws, Art. 4.3; Tr. at 847 (Tagliabue).

17. The rules and procedures by which the NFL controls the location, and relocation, of the member clubs promote fan interest in NFL football by inter alia, preserving and enhancing the relationship between NFL clubs and their communities and by fostering fan loyalty to individual teams. Tr. at 861-863 (Tagliabue), 357-359 (Braman).

18. The League relocation rules further ensure that problems for which an individual club owner is responsible cannot be a justification for a franchise relocation. Without such protection, the League would (and in the past has) faced severe criticism for allowing a club to move. Tr. at 869-870 (Tagliabue).

19. The location of NFL clubs is one of the most important factors that affects the success of all of the clubs collectively. This is because the choice of markets in which the clubs will operate and how they relate to each other is a very big factor in terms of television, in terms of attendance, and in terms of coverage of the entire United States. Tr. at 847-88 (Tagliabue).

20. It is important for the NFL to have clubs in the larger metropolitan cities, because the clubs depend upon the television and ticket revenues earned from the larger markets. A move of a team from a large city to a small city hurts the entire League. Tr. at 358 (Braman).

21. The NFL has a policy of requesting releases from departing owners, and this policy has been applied to selling owners who had no interest in relocating. Tr. at 900-01 (Tagliabue), 1089 (Moyer).

22. This policy was adopted in response to litigation initiated by former NFL club owners. Tr. at 900 (Tagliabue), 1089 (Moyer).

23. The NFL has an interest in enhancing the relationship between NFL clubs and their communities and fostering fan loyalty to individual teams. Tr. at 861-863 (Tagliabue), 357-359 (Braman).

Kiam's Purchase of the Patriots

24. In October 1988, Kiam purchased a 51% interest in the New England Patriots for approximately $85 million. Tr. at 56 (Kiam); 856-857 (Paul Tagliabue).

25. When Kiam purchased his interest in the Patriots, he signed a written agreement promising to comply with "all NFL rules and policies as now in effect or as hereafter amended," and further promising to "obtain advance approval by the NFL of any transfer" or sale of a franchise ownership interest. September 13, 1988 Letter Agreement (Defendants' Exhibit 16 to Materials In Support of Defendants' Motion for Summary Judgment on the Merits of Plaintiffs' Antitrust Claims).*fn5

26. At the time Kiam purchased the Patriots, he was aware of the following:

  • The Patriots were committed to a lease which
    provided that they would play football in Foxboro,
    Massachusetts through the 2001 football season. Tr.
    at 243 (Kiam).
  • The lease that was in place was disadvantageous to
    the Patriots because it allocated a major portion
    of the stadium revenues to the stadium lessor, not
    to the team. Tr. at 48-49, 241-242 (Kiam).
  • The company that owned the stadium was in
    bankruptcy. Tr. at 59, 246 (Kiam).
  • Kiam would have to agree to go forward with Fran
    Murray as his partner and to grant Murray the right
    to force Kiam later to purchase his 49% interest in
    the club. Tr. at 56, 81, 255, 258 (Kiam).
  • The Patriots had a long history of losses and were
    "completely out of money." Tr. at 45 (Kiam). The
    team was having financial difficulties. Tr. 235-236
    (Kiam).
  • Kiam's financial advisors forecasted that the
    Patriots would continue to have operating losses
    for at least a few years after his purchase of the
    club. Tr. at 408 (Robert Romano).
  • Foxboro Stadium was old and in an undesirable
    location. Tr. at 45-48, 243-244 (Kiam).
  • 16 prior persons had considered buying the team and
    decided not to do so. Tr. at 49 (Kiam).

27. The NFL did not force Mr. Kiam to purchase the Patriots. Mr. Kiam himself made that ...


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