Warrior Sports, Incorporated v. NCAA

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 10a0316p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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Plaintiff-Appellant, -

WARRIOR SPORTS, INCORPORATED,

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No. 09-1395

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Plaintiff, -

ATHLETE’S CONNECTION,

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v.

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NATIONAL COLLEGIATE ATHLETIC

Defendant-Appellee. -

ASSOCIATION,

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Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 08-14812—Marianne O. Battani, District Judge.

Argued: April 28, 2010

Decided and Filed: August 20, 2010*

Before: BATCHELDER, Chief Judge; MOORE and COOK, Circuit Judges.

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COUNSEL

ARGUED: John J. Bursch, WARNER NORCROSS & JUDD LLP, Grand Rapids,

Michigan, for Appellant. Robert J. Wierenga, MILLER, CANFIELD, PADDOCK AND

STONE, P.L.C., Ann Arbor, Michigan, for Appellee. ON BRIEF: John J. Bursch,

Charles N. Ash, Aaron D. Lindstrom, WARNER NORCROSS & JUDD LLP, Grand

Rapids, Michigan, William R. Jansen, Michael G. Brady, WARNER NORCROSS &

JUDD LLP, Southfield, Michigan, for Appellant. Robert J. Wierenga, Gregory L.

Curtner, David R. Grand, Kimberly K. Kefalas, MILLER CANFIELD, PADDOCK

AND STONE, P.L.C., Ann Arbor, Michigan, for Appellee.

*

This decision was originally issued as an “unpublished decision” filed on August 20, 2010. On

September 24, 2010, the court designated the opinion as one recommended for full-text publication.

1

No. 09-1395 Warrior Sports v. Nat’l Collegiate Athletic Ass’n Page 2

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OPINION

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COOK, Circuit Judge. Warrior Sports filed suit claiming that, by changing the

rule that governs the size of lacrosse stick heads approved for use in NCAA-sanctioned

play, the NCAA violated the Sherman Act and tortiously interfered with Warrior’s

business. After denying Warrior’s preliminary injunction request, the district court

granted judgment on the pleadings in favor of the NCAA. Warrior appeals, and we

affirm.

I.

Defendant-Appellee the National Collegiate Athletic Association (NCAA) sets

the rules that govern intercollegiate athletic competitions involving its member schools,

including the play and equipment rules for men’s lacrosse matches. Other league

governing bodies, including the National Federation of High School Sports, adopt and

follow the rules set by the NCAA, giving those rules particularly strong influence on the

market for lacrosse equipment. Plaintiff-Appellant Warrior Sports, Inc. manufactures

and distributes lacrosse sticks.

Prior to 2006, the rule governing the allowable dimensions of lacrosse stick

heads (Playing Rule 1-17) remained unchanged for thirty years, setting the width of the

head at a minimum of 6.5” at its widest point and 10” from top to bottom. Traditional

heads were triangular in shape, but because the rule did not specify a minimum width

for the base (or “channel”) of the head, manufacturers began producing heads with a

more pinched shape. According to the NCAA, the pinched design made it more difficult

for a player to dislodge the ball from an opponent’s stick during play, which prompted

players to use increasing amounts of force when attempting to do so, leading to more

injuries. To address this and other issues, in 2006, the NCAA initiated its rule-changing

process. The NCAA Lacrosse Rules Committee met with equipment manufacturers

(Warrior among them) to address potential rule changes, including the addition of a

No. 09-1395 Warrior Sports v. Nat’l Collegiate Athletic Ass’n Page 3

minimum width requirement for the channel, aimed at resolving the dislodgement

problem. On September 7, 2006, the Rules Committee announced proposed changes to

Rule 1-17 instituting minimum width requirements for the channel of the stick head.

The 2006 Rule Change (intended to go into effect on January 1, 2009) would have

rendered the vast majority of all men’s stick heads, including 14 of the 15 models

marketed by Warrior, illegal for NCAA play. Warrior responded by filing a lawsuit in

the Eastern District of Michigan challenging the 2006 Rule Change, but dismissed the

action after the NCAA agreed to reconsider the proposed change.

The NCAA solicited additional input from all concerned manufacturers,

including Warrior, about how to improve the new specifications. To address the

dislodgement issue, Warrior suggested incorporating a “flare” design—a design on

which it held a patent, though it failed to disclose that fact to the NCAA at the time. In

September 2007, the Rules Committee adopted a new rule (the 2007 Rule Change)

intended to go into effect January 1, 2010. Much like the 2006 Rule Change, the 2007

Rule Change would have rendered the majority of stick heads on the market illegal,

including all 15 of those marketed by Warrior. Significantly, the measurements

incorporated into the 2007 Rule Change promoted a flared head design and closely

tracked the design patented (but at the time not being marketed) by Warrior. When the

NCAA learned of Warrior’s patent after adopting the change, it sent Warrior a letter

asking whether and under what terms the company would be willing to license its

intellectual property rights to other lacrosse equipment manufacturers. Viewing this

correspondence as a veiled threat by the NCAA to change the rules again if Warrior

refused to negotiate licenses with its competitors, Warrior responded that it perceived

the NCAA’s letter as inappropriate and would not consider licensing its rights in the

abstract because it did so only on a case-by-case basis.

The NCAA adopted a third rule change in February 2008 (the 2008 Rule Change)

and scheduled its effective date for January 1, 2010. Like the 2007 Rule Change, the

2008 Rule Change rendered Warrior’s entire existing line of stick heads illegal. The

specifications adopted in the 2008 Rule Change differed only slightly from those in the

No. 09-1395 Warrior Sports v. Nat’l Collegiate Athletic Ass’n Page 4

2007 Rule Change—broadening the range of permissible widths. This modification

allows stick heads using either straight or flared walls to satisfy the rule, and any head

that would have satisfied the 2007 Rule Change necessarily also passes muster under the

2008 Rule Change. Notably, the 2008 Rule Change permits the use of any stick head

designed in conformity with Warrior’s patent.

Warrior responded to the 2008 Rule Change by filing suit against the NCAA in

the Western District of Michigan accusing the NCAA of violating the Sherman Act and

tortiously interfering with its business relationships.1 Warrior moved for a preliminary

injunction and asked the district court to consider the motion on an expedited basis.

Concerned that Warrior was forum shopping,2 the NCAA immediately opposed

Warrior’s request for expedited consideration of its injunction request and moved to

transfer venue to the Eastern District. The court sided with the NCAA, refusing to

expedite the injunction request and transferring the case to the Eastern District of

Michigan. The NCAA promptly filed an answer and moved for judgment on the

pleadings under Rule 12(c). By memorandum opinion dated January 30, 2009, the

district court denied Warrior’s preliminary injunction motion, Warrior Sports, Inc. v.

Nat’l Collegiate Athletic Ass’n, No. 08-14812, 2009 WL 230562 (E.D. Mich. Jan. 30,

2009), and later, in a separate opinion, granted judgment on the pleadings in the NCAA’s

favor, Warrior Sports, Inc. v. Nat’l Collegiate Athletic Ass’n (Warrior II), No. 08-14812,

2009 WL 646633 (E.D. Mich. Mar. 11, 2009). Warrior appeals.

II.

We review the district court’s grant of a motion for judgment on the pleadings

de novo using the same standard as for a motion to dismiss under Rule 12(b)(6). EEOC

v. J.H. Routh Packing Co., 246 F.3d 850, 851 (6th Cir. 2001). “For purposes of a motion

1

Warrior’s complaint also asserted a promissory estoppel claim on which the district court granted

judgment in the NCAA’s favor. Warrior does not appeal that portion of the court’s ruling.

2

Although the district court never reached the merits of the first lawsuit before Warrior

voluntarily dismissed it, the NCAA successfully moved, over Warrior’s objection, to stay discovery in that

action pending resolution of the NCAA’s Rule 12(b)(6) motion—suggesting a motive for Warrior’s choice

of the Western District for its second filing.

No. 09-1395 Warrior Sports v. Nat’l Collegiate Athletic Ass’n Page 5

for judgment on the pleadings, all well-pleaded material allegations of the pleadings of

the opposing party must be taken as true, and the motion may be granted only if the

moving party is nevertheless clearly entitled to judgment.” JPMorgan Chase Bank, N.A.

v. Winget, 510 F.3d 577, 581 (6th Cir. 2007) (internal citation and quotation marks

omitted).

A.

Warrior alleged that the changes to Rule 1-17—including the 2008 Rule Change,

which the NCAA “appears to have” adopted “for improper and anticompetitive reasons

under the influence of one or more of [Warrior’s] competitors”—violated § 1 of the

Sherman Act, which prohibits “[e]very contract, combination . . . , or conspiracy, in

restraint of trade or commerce.” 15 U.S.C. § 1. Because “nearly every contract binding

parties to an agreed course of conduct amounts to some sort of ‘restraint of trade,’ the

Supreme Court has limited the restrictions of section 1 to bar only ‘unreasonable

restraints.’” Care Heating & Cooling, Inc. v. Am. Standard, Inc., 427 F.3d 1008, 1012

(6th Cir. 2005) (quoting Nat’l Hockey League Players’ Ass’n v. Plymouth Whalers

Hockey Club, 325 F.3d 712, 718 (6th Cir. 2003)).

The district court examined all three of the changes to Rule 1-17. It concluded

that the 2006 and 2007 Rule Changes were noncommercial and therefore immune from

antitrust challenge. Assessing the 2008 Rule Change, the court found that, in light of

Warrior’s accusation that the NCAA enacted it in collusion with Warrior’s competitors,

the 2008 Rule Change served a commercial purpose because Warrior’s “competitors

presumably sought to enact the rule in order to benefit commercially.” Warrior II, 2009

WL 646633, at *4. The court nevertheless rejected Warrior’s antitrust claim, finding

that the 2008 Rule Change did not restrain trade or commerce because, when compared

to the 2007 Rule Change, the 2008 rule expanded the range of stick head designs that

could meet the standards for NCAA-approved play. Id.

We agree with the district court’s ultimate conclusion, but employ a slightly

different analysis. The NCAA dropped the 2006 and 2007 Rule Changes before they

ever went into effect, and thus they cannot be challenged because they necessarily did

No. 09-1395 Warrior Sports v. Nat’l Collegiate Athletic Ass’n Page 6

not cause (nor do they threaten to cause) any injury to Warrior or anyone else. See

Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 788–89 (6th Cir. 2002) (“An

antitrust plaintiff bears the burden of showing that the alleged violation was a material

cause of its injury, a substantial factor in the occurrence of damage or that the violation

was the proximate cause of the damage.”). So although the district court chose to

compare the 2008 Rule Change to the 2007 Rule Change to determine whether the 2008

rule restrained trade or commerce, we find that comparison inapt, given that the 2007

rule never took effect. Rather, as the sole rule change ever to take effect, only the 2008

Rule Change matters for purposes of the antitrust analysis.

Although the district court concluded that Warrior’s allegation of collusion

between the NCAA and Warrior’s competitors transformed the otherwise

noncommercial rule governing athletic competition into a commercial one subject to

antitrust scrutiny, we avoid that question by assuming the rule to be commercial and cut

to the heart of Warrior’s antitrust claim, finding the challenged rule does not harm

competition and, consequently, does not unreasonably restrain trade or commerce.

Warrior’s Sherman Act claim thus fails as a matter of law.

Two frameworks exist for analyzing Sherman Act claims: the per se rule and the

rule of reason. Care Heating & Cooling, 427 F.3d at 1012. But Warrior’s failure to

challenge the rule as per se unlawful in proceedings below leaves it with only a rule-of-

reason argument.3 To state a claim under the rule-of-reason test, a plaintiff must allege,

inter alia, that the purportedly unlawful contract, combination, or conspiracy “produced

adverse, anticompetitive effects within relevant product and geographic markets.”

Crane & Shovel Sales Corp. v. Bucyrus-Erie Co., 854 F.2d 802, 805 (6th Cir. 1988)

(internal quotation marks and citation omitted); see also Nat’l Hockey League Players

Ass’n, 419 F.3d at 473 (“[A] plaintiff alleging an unreasonable restraint on trade under

3

Although Warrior argues in its opening brief that the 2008 Rule Change is per se unlawful, the

NCAA responds that Warrior never raised this argument in the district court. In its opinion, the district

court explicitly noted that Warrior “does not contend that the per se rule applies.” This court “generally

‘cannot consider an issue not passed on below,’” and exercises its “discretion to rule on an issue not

decided below only in ‘exceptional cases.’” St. Mary’s Foundry, Inc. v. Emp’rs Ins. of Wausau, 332 F.3d

989, 995–96 (6th Cir. 2003) (citations omitted). Warrior fails to satisfy the “exceptional case” standard,

so the panel bypasses analysis under the per se rule.

No. 09-1395 Warrior Sports v. Nat’l Collegiate Athletic Ass’n Page 7

the rule of reason theory must show significant anti-competitive effects of the challenged

restraint.”). The Sherman Act exists for “the protection of competition, not

competitors,” Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 338 (1990), and

thus “the foundation of an antitrust claim is the alleged adverse effect on the market.”

Care Heating & Cooling, 427 F.3d at 1014.

Warrior’s complaint fails to identify any anticompetitive effects on the market

for lacrosse sticks attributable to the 2008 Rule Change (or, for that matter, to any other

version of Rule 1-17). Rule 1-17, irrespective of the various versions’ specifications,

applies to all manufacturers, including Warrior, in exactly the same way.4 Any

manufacturer wishing to market a lacrosse stick approved for use in NCAA competition

(or in any competition governed by the NCAA standards) must conform the stick to the

dimensions specified in the rule. To be sure, rule changes impose costs on

manufacturers: they must adapt their processes to make sticks that meet the new rule’s

specs; and their stock of non-conforming sticks becomes obsolete. But Warrior fails to

allege any facts that would support a conclusion that the rule even arguably injures

competition. Indeed, by complaining that the new rule will “neutralize Warrior’s

intellectual property rights and market position . . . opening the door and paving the way

for new entrants,” Warrior concedes that the 2008 Rule Change will increase

competition, not reduce it. Because the new rule applies equally to all manufacturers,

Warrior may compete in the market on the same footing as all other participants. This

includes an ability to sell stick heads produced in conformity with its patent, which the

2008 Rule Change does not bar. Warrior’s failure to allege an injury to competition

dooms its Sherman Act claim as a matter of law.

4

We note Warrior’s complaint may inadequately allege the relevant market. See, e.g., Worldwide

Basketball & Sport Tours, Inc. v. NCAA, 388 F.3d 955, 963–64 (6th Cir. 2004).

No. 09-1395 Warrior Sports v. Nat’l Collegiate Athletic Ass’n Page 8

B.

Under Michigan law, a claim of tortious interference with business relationship

requires proof of (1) a valid business relationship or expectancy; (2) knowledge of that

relationship or expectancy on the part of the defendant; (3) an intentional interference

by the defendant inducing or causing a breach or termination of that relationship or

expectancy; and (4) resulting damage to the plaintiff. Via The Web Designs, L.L.C. v.

Beauticontrol Cosmetics, Inc., 148 F. App’x 483, 487 (6th Cir. 2005) (citing Baidee v.

Brighton Area Schs., 695 N.W.2d 521, 538 (Mich. Ct. App. 2005)). “The third element

of [this] tort requires the plaintiff to demonstrate that the third party was induced either

to breach the contract or to break off the prospective business relationship by an

intentional act that is either (1) wrongful per se; or (2) lawful, but done with malice and

unjustified in law.” Id. (citing CMI Int’l, Inc. v. Intermet Int’l Corp., 649 N.W.2d 808,

812 (Mich. Ct. App. 2002)).

The district court rejected Warrior’s tortious interference claim, finding that,

though Warrior alleged collusion regarding the 2008 Rule Change in a way that might

suggest malice, it ultimately failed to demonstrate “that the adoption of the 2008 Rule

Change was done with a malicious and unlawful purpose, because the only effect of the

2008 Rule Change [when compared to the 2007 Rule Change] was to increase the

number of sticks that would be allowed under the NCAA’s rules.” Warrior II, 2009 WL

646633, at *4. We decline to adopt the court’s analysis, but agree with its ultimate

conclusion.

“To establish that a lawful act was done with malice and without justification,

the plaintiff must demonstrate, with specificity, affirmative acts by the[] defendant that

corroborate the improper motive of the interference.” Erickson’s Flooring & Supply Co.

v. Tembec, Inc., 212 F. App’x 558, 566 (6th Cir. 2007) (quoting Mino v. Clio Sch. Dist.,

661 N.W.2d 586, 597–98 (Mich. Ct. App. 2003)). Taking a comprehensive view of the

allegations in the complaint, Warrior fails to allege specific, affirmative actions by the

NCAA that corroborate its claim of malice. Indeed, its vague assertion that “in deciding

to change the rules, [the NCAA] appears to have acted for improper and anticompetitive

No. 09-1395 Warrior Sports v. Nat’l Collegiate Athletic Ass’n Page 9

reasons under the influence of one or more of the competitors of [Warrior],” Compl. ¶ 3,

lacks the specificity required by Michigan law. And nothing about the content or

character of the 2008 Rule Change—which applies equally to all lacrosse stick

manufacturers—inherently suggests that the NCAA intended to cause Warrior harm.5

Accordingly, we affirm the judgment in favor of the NCAA on Warrior’s tortious

interference claim.

III.

For these reasons, we affirm the judgment of the district court.

5

Nor does Warrior’s repeated insistence that the Rule Changes do not actually make it easier to

dislodge the ball create such an inference. Warrior fails to cite any law suggesting that a sports rule-

making body with a facially plausible concern about a competition issue must supply empirical proof that

a proposed rule change actually remedies the concern before enacting the rule.