American Needle, Incorporated v. National Football League

In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 07-4006

A MERICAN N EEDLE INC.,

Plaintiff-Appellant,

v.

N ATIONAL F OOTBALL L EAGUE et al.,

Defendants-Appellees.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 04 C 7806—James B. Moran, Judge.

____________

A RGUED JUNE 3, 2008—D ECIDED A UGUST 18, 2008

____________

Before K ANNE, SYKES, and T INDER, Circuit Judges.

K ANNE, Circuit Judge. American Needle Inc. sued the

National Football League (NFL), its member football

teams, and NFL Properties LLC (to whom we will collec-

tively refer as “the NFL defendants”), along with Reebok

International Ltd. (“Reebok”), alleging that the teams’

exclusive licensing agreement with Reebok violated the

Sherman Antitrust Act. See 15 U.S.C. §§ 1-2. The district

court granted summary judgment to the NFL defendants.

We affirm.

2 No. 07-4006

I. H ISTORY

As the most successful and popular professional sports

league in America today, the NFL needs little introduc-

tion. Indeed, the NFL has inspired countless hours of

heated and in-depth discussion about the league’s 88 years

of professional-football history, including its great

players, championship teams, and memorable games. But

the only discussion the NFL inspires here involves

aspects of the league that are not as well known: the

league’s corporate structure, and the nature of its relation-

ships with its member teams and the entities charged with

licensing those teams’ intellectual property.

For those who do not know, the NFL is an unincorpo-

rated association of (now) 32 separately owned and

operated football teams that collectively produce an

annual series (or “season”) of over 250 interrelated foot-

ball games. Each season culminates in a championship

game—a game better known as the Super Bowl. As such,

the product that the teams produce jointly—NFL foot-

ball—requires extensive coordination and integration

between the teams. After all, NFL football is produced

only when two teams play a football game. Thus, although

each team is a separate corporate entity or partnership

unto itself, no team can produce a game—the product of

NFL football—by itself, much less a full season of games or

the Super Bowl. Likewise, the teams’ individual success is

necessarily linked to the success of the league as a whole;

to put it another way, it makes little difference if a team

wins the Super Bowl if no one cares about the Super Bowl.

Realizing that the success of the NFL as a whole was

in their best interests, in the early 1960’s the individual

No. 07-4006 3

teams sought to collectively promote the NFL Brand—that

is, the intellectual property of the NFL and its member

teams—to compete against other forms of entertainment.

With this promotional effort in mind, in 1963 the NFL

teams formed NFL Properties: a separate corporate

entity charged with (1) developing, licensing, and market-

ing the intellectual property the teams owned, such as their

logos, trademarks, and other indicia; and (2) “conduct[ing]

and engag[ing] in advertising campaigns and promotional

ventures on behalf of the NFL and [its] member [teams].”

Among other things, the NFL teams authorized NFL

Properties to grant licenses to vendors so the vendors

could use the teams’ intellectual property to manufacture

and sell various kinds of consumer products that bear

the teams’ logos and trademarks—products such as

team jerseys, shirts, flags, and, as pertinent here, head-

wear, like baseball caps and stocking hats.

For a while after its establishment, NFL Properties

granted headwear licenses to a number of different ven-

dors simultaneously; one of those vendors was American

Needle, which held an NFL headwear license for over

20 years. But then in 2000, the NFL teams authorized

NFL Properties to solicit bids from the vendors for an

exclusive headwear license. Reebok won the bidding war,

and in 2001 the NFL teams allowed NFL Properties to

grant an exclusive license to Reebok for ten years. NFL

Properties thus did not renew American Needle’s

headwear license, or the licenses of the other headwear

vendors.

American Needle responded to the loss of its headwear

license by filing an antitrust action against the NFL, NFL

4 No. 07-4006

Properties, the individual NFL teams, and Reebok. As

relevant here, American Needle claimed that the exclusive

headwear licensing agreement between NFL Properties

and Reebok violated § 1 of the Sherman Antitrust Act,

which outlaws any “contract, combination . . . or conspir-

acy, in restraint of trade.” 15 U.S.C. § 1. As American

Needle saw it, because each of the individual teams

separately owned their team logos and trademarks, their

collective agreement to authorize NFL Properties to award

the exclusive headwear license to Reebok was, in fact, a

conspiracy to restrict other vendors’ ability to obtain

licenses for the teams’ intellectual property. American

Needle also contended that, by authorizing NFL Properties

to award the license to Reebok, the NFL teams monopo-

lized the NFL team licensing and product wholesale

markets in violation of § 2 of the Sherman Antitrust Act.

See id. § 2.

One year after American Needle brought its suit, the

NFL defendants filed a motion for summary judgment

on the company’s § 1 claim. The NFL defendants argued

that, under the United States Supreme Court’s decision

in Copperweld Corp. v. Independence Tube Corp., 467 U.S.

752 (1984), and its progeny, they were immune from

liability under § 1. In Copperweld, the Supreme Court

concluded that a parent corporation and its wholly owned

subsidiary are a single entity for antitrust purposes. Id. at

771. The Court based its conclusion on its determination

that the parent-subsidiary relationship did not yield the

anti-competitive risks that the Sherman Antitrust Act

was enacted to combat. Id. at 769, 771. Specifically, the

Court stated that agreements between companies are

No. 07-4006 5

generally subject to § 1 review because they deprive the

market of the independent sources of economic power

that competition requires. Id. at 769. But because the

parent-subsidiary relationship is always “guided or

determined not by two separate corporate consciousnesses,

but one,” the relationship does not deprive the market

of any independent sources of economic power. Id. at 771.

Federal courts in later cases extended the single-entity

concept beyond the context of a parent-subsidiary rela-

tionship, stating that affiliated companies or individuals

could also be considered a single entity in certain circum-

stances. See, e.g., Jack Russell Terrier Network v. Am. Kennel

Club, Inc., 407 F.3d 1027, 1035 (9th Cir. 2005); Eleven Line,

Inc. v. N. Tex. State Soccer Ass’n, 213 F.3d 198, 205 (5th Cir.

2000); Chi. Prof’l Sports Ltd. v. Nat’l Basketball Ass’n (“Bulls

II”), 95 F.3d 593, 597-600 (7th Cir. 1996); City of Mt. Pleasant

v. Associated Elec. Coop., Inc., 838 F.2d 268, 271, 276-77 (8th

Cir. 1988). Relying on this gradual extension of Copperweld,

the NFL defendants asserted that they functioned as a

single entity when collectively promoting NFL football

by licensing the NFL teams’ intellectual property, and

were thus immune from liability under § 1.

American Needle did not immediately oppose the NFL

defendants’ summary-judgment motion. Instead, the

company moved for a continuance under Fed. R. Civ. P.

56(f) on the ground that it was “unable to present admissi-

ble evidence” to dispute the NFL defendants’ single-entity

defense. That evidence, American Needle stated, “was in

the possession of the defendants.” The company therefore

asked the district court for the opportunity to take dis-

6 No. 07-4006

covery regarding the NFL defendants’ single-entity defense

and “a number of issues generally,” and included a list

of 51 discovery requests.

The NFL defendants, in turn, objected to American

Needle’s discovery requests on the ground that, as a

whole, they were not limited to the single-entity issue. The

NFL defendants, did, however, offer to produce a wide

range of documents they considered to be related to their

single-entity defense. The district court reserved judg-

ment on the NFL defendants’ objection, and urged Ameri-

can Needle to narrow its discovery requests. In response,

American Needle made additional discovery requests

that were even more extensive in scope and number than

its original requests. The NFL defendants again objected,

and the district court ruled that, until the NFL defendants’

summary-judgment motion was resolved, discovery

would be limited to the single-entity issue. The court then

ordered the NFL defendants to produce all documents

pertinent to their single-entity defense.

Discovery ensued. The NFL defendants abided by the

district court’s order and disclosed a voluminous amount

of documents related to their single-entity defense. But

when discovery concluded, American Needle filed a

second Rule 56(f) motion. As it had done earlier, American

Needle stated that it was “unable to present admissible

evidence” to dispute the NFL defendants’ single-entity

defense because that evidence was “in the possession of

the defendants.” American Needle then listed 49 discovery

requests it sought to have the NFL defendants complete;

most of those requests were copied verbatim from the

No. 07-4006 7

requests American Needle made earlier. The district court

took American Needle’s second Rule 56(f) motion under

advisement, and ordered the company to respond to the

merits of the NFL defendants’ summary-judgment motion.

Shortly after briefing completed, the district court

issued an order in which it both denied American Needle’s

Rule 56(f) motion, and granted the NFL defendants’

motion for summary judgment on American Needle’s § 1

claim. The district court determined that further discovery

on the single-entity issue was unnecessary because “the

facts that materially [bore] upon the [court’s] decision[ ]

[were] undisputed,” and led “to the conclusion that the

NFL and the teams act as a single entity in licensing their

intellectual property.” The court’s conclusion was based on

its determination that the NFL teams’ collective-licensing

agreement serves “to promote NFL football.” And by

promoting NFL football through collective licensing, the

court continued, the NFL teams “act[ ] as an economic

unit” in such a manner that “they should be deemed to be

a single entity.” The court therefore concluded that Ameri-

can Needle’s § 1 claim failed as a matter of law because,

under Copperweld, single entities cannot restrain trade in

violation of the Sherman Antitrust Act. The court then

sought supplemental briefing on whether its single-entity

finding compelled the dismissal of American Needle’s § 2

monopolization claim.

After the parties submitted their briefs addressing

American Needle’s § 2 monopolization claim, the court

granted summary judgment to the NFL defendants. The

court concluded that its earlier single-entity determina-

8 No. 07-4006

tion doomed American Needle’s § 2 claim because, as a

single entity, the NFL and its member teams could collec-

tively license their intellectual property “to one or many

without running afoul of the antitrust laws.” This appeal

followed.

II. A NALYSIS

American Needle attacks the district court’s judgment by

forwarding two arguments. First, American Needle

contends that the district court incorrectly denied its Rule

56(f) motion before granting summary judgment to the

NFL defendants on its § 1 claim. American Needle further

asserts that the district court was wrong to grant the

NFL defendants’ motions for summary judgment on both

its § 1 and § 2 monopolization claims. We address these

arguments in turn.

A. The district court’s denial of American Needle’s Rule 56(f)

motion

We first address the district court’s denial of American

Needle’s Rule 56(f) motion, a decision that we review for

abuse of discretion. See Hammer v. Ashcroft, 512 F.3d 961,

971 (7th Cir. 2008). According to American Needle, the

district court abused its discretion by allowing it, without

explanation, “to obtain only those documents that the

[NFL] defendants themselves agreed to provide,” and not

the documents that the company sought in its discovery

requests. In American Needle’s view, the district court

No. 07-4006 9

“cannot, without explanation, permit one party to

control the flow of information” in discovery, and “[t]o

do so is not the exercise, but the abdication, of discretion.”

But the premise of American Needle’s argument is

flawed: the district court did not, as American Needle puts

it, “abdicate” its discretion over discovery matters to the

NFL defendants “without explanation.” To the contrary,

the district court’s denial of American Needle’s Rule 56(f)

motion was thoroughly explained.

After American Needle submitted its second set of wide-

ranging discovery requests, the district court ruled that

discovery would be limited to only those documents

pertaining to the NFL defendants’ single-entity defense,

and ordered the defendants to turn over all the docu-

ments related to their defense. And in its order rejecting

American Needle’s second Rule 56(f) motion, the court

clearly explained that further discovery was unnecessary

because “the facts that materially [bore] upon the [court’s]

decision[ ] [were] undisputed,” and led “to the conclu-

sion that the NFL and the teams act as a single entity in

licensing their intellectual property.”

In any event, American Needle fails to show that the

district court was wrong to deny additional discovery. To

succeed on its challenge, American Needle needs to

identify the “specific evidence which [it] might have

obtained from [the NFL defendants] that would create a

genuine issue” as to the defendants’ single-entity defense,

and thus allow American Needle’s § 1 claim to survive

summary judgment. Davis v. G.N. Mortgage Corp., 396

F.3d 869, 885 (7th Cir. 2005); see also United States v. All

10 No. 07-4006

Assets & Equip. of W. Side Bldg. Corp., 58 F.3d 1181, 1190-91

(7th Cir. 1995) (affirming district court’s denial of de-

fendants’ request for additional discovery because

request “lacked specificity concerning what information

[the defendants] hoped to uncover and how it would

refute [the claims brought against them]”). American

Needle identifies no such evidence, however; instead, the

company merely explains that further discovery was

necessary because “the determination of the single

entity question [sic] requires a fact intensive inquiry [sic].”

However, American Needle’s point is irrelevant. Just

because the resolution of the single-entity issue is “fact

intensive” does not speak to whether additional discovery

was necessary to uncover specific evidence; after all, the

large number of documents American Needle obtained

from the NFL defendants could have provided such a

complete answer to the “fact-intensive” question as to

render further discovery unnecessary. We thus cannot

say that the district court abused its discretion by

denying American Needle’s Rule 56(f) motion. See Davis,

396 F.3d at 885; All Assets & Equip., 58 F.3d at 1190-91.

B. The district court’s grant of summary judgment to the

NFL defendants

American Needle next challenges the district court’s

grant of summary judgment to the NFL defendants. We

review the district court’s grant of summary judgment

de novo, taking the facts in the light most favorable to

American Needle, the non-moving party. See Foskett v.

No. 07-4006 11

Great Wolf Resorts, Inc., 518 F.3d 518, 522 (7th Cir. 2008).

And in so viewing the record, we will examine whether

there is a genuine issue of material fact that precludes

judgment as a matter of law. See Fed. R. Civ. P. 56(c);

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Cady v.

Sheahan, 467 F.3d 1057, 1060-61 (7th Cir. 2006).

American Needle first contends that the district court

erred by granting the NFL defendants’ summary judg-

ment on its § 1 claim. Specifically, American Needle

argues that the district court incorrectly concluded that

the NFL teams constitute a single entity under Copperweld

when collectively licensing their intellectual property.

American Needle’s argument leads us into murky wa-

ters. We have yet to render a definitive opinion as to

whether the teams of a professional sports league can be

considered a single entity in light of Copperweld. The

characteristics that sports leagues generally exhibit make

the determination difficult; in some contexts, a league

seems more aptly described as a single entity immune

from antitrust scrutiny, while in others a league appears

to be a joint venture between independently owned

teams that is subject to review under § 1. See Brown v. Pro-

Football, Inc., 518 U.S. 231, 248-49 (1996) (“[T]he clubs that

make up a professional sports league are not com-

pletely independent economic competitors . . . . In the

present context, however, that circumstance makes the

league more like a single bargaining employer . . . .”); Bulls

II, 95 F.3d at 597-99 (“To say that the league is ‘more like

a single bargaining employer’ than a multi-employer unit

is not to say that it necessarily is one, for every purpose.”);

see also Super Sulky, Inc. v. U.S. Trotting Ass’n, 174 F.3d 733,

12 No. 07-4006

741 (6th Cir. 1999) (“[T]he notion of concerted action

liability in the field of professional sports is at best con-

fusing.”). For instance, from the perspective of fans, a

professional sports league can be seen as “a single source”

of entertainment that produces “one product,” even

though the league’s member teams are distinguishable.

Bulls II, 95 F.3d at 599. Yet at the same time, individuals

seeking employment with any of the league’s teams

would view the league as a collection of loosely affiliated

companies that all have the independent authority to hire

and fire employees. See Brown, 518 U.S. at 249 (noting that

professional football players “often negotiate their pay

individually with their employers,” NFL teams); Bulls II,

95 F.3d at 599 (“[F]rom the perspective of college basket-

ball players who seek to sell their skills, the teams [in

the National Basketball League (NBA)] are distinct . . . .”).

That being said, we have nevertheless embraced the

possibility that a professional sports league could be

considered a single entity under Copperweld. Bulls II, 95

F.3d at 598. But see Fraser v. Major League Soccer, L.L.C., 284

F.3d 47, 55-56 (1st Cir. 2002) (citing Sullivan v. Nat’l Football

League, 34 F.3d 1091, 1099 (1st Cir. 1994), to note that

Bulls II has not yet been adopted by United States Court

of Appeals for the First Circuit). But because of the many

and conflicting characteristics that professional sports

leagues generally exhibit, we have expressed skepticism

that Copperweld could provide the definitive single-entity

determination for all sports leagues alike. See id. at 599-600.

This skepticism, in turn, has led us to opine that the

question of whether a professional sports league is a

single entity should be addressed not only “one league

No. 07-4006 13

at a time,” but also “one facet of a league at a time.” Id. at

600. Thus, in reviewing the district court’s decision, we

will limit our review to (1) the actions of the NFL, its

members teams, and NFL Properties; and (2) the actions of

the NFL and its member teams as they pertain to

the teams’ agreement to license their intellectual

property collectively via NFL Properties.

With this compartmentalization of Copperweld in mind,

we turn to American Needle’s challenge to the district

court’s single-entity determination. According to Ameri-

can Needle, the district court applied the wrong legal

standard when concluding that the NFL teams were a

single entity. As American Needle sees it, the district

court concluded “that the NFL [t]eams are a single entity

because they ‘act’ as a single entity in licensing their

intellectual property.” American Needle asserts that this

approach undercuts the Supreme Court’s central teaching

in Copperweld: that the Sherman Antitrust Act was de-

signed to combat the deprivation of independent

sources of economic power in the marketplace. See 467

U.S. at 469-71.

Therefore, American Needle continues, instead of asking

whether the NFL teams merely “ ‘act’ ” as a single entity,

the district court should have inquired into whether the

NFL teams’ agreement to license their intellectual property

collectively deprived the market of sources of economic

power that control the intellectual property. That question,

the company contends, can be answered by looking to

whether the teams could compete against one another

when licensing and marketing their intellectual property.

14 No. 07-4006

If so, American Needle posits, then it is the individual

teams who actually control their intellectual property,

meaning that they cannot be considered a single entity

for the purposes of licensing their intellectual property.

We agree with American Needle that the Supreme Court

in Copperweld was concerned about the anti-competitive

effects that collective action might introduce into the

market. See id.; Bulls II, 95 F.3d at 598; see also Spectrum

Sports v. McQuillan, 506 U.S. 447, 458-59 (1993) (discussing

Copperweld in context of § 2 claim); Goldwasser v. Ameritech

Corp., 222 F.3d 390, 397 (7th Cir. 2000) (same). We

further agree that when making a single-entity deter-

mination, courts must examine whether the conduct in

question deprives the marketplace of the independent

sources of economic control that competition assumes. See

Copperweld, 467 U.S. at 469-71; Bulls II, 95 F.3d at 598;

Ball Mem’l Hosp., Inc. v. Mut. Hosp. Ins., Inc., 784 F.2d

1325, 1337 (7th Cir. 1986).

But we are not convinced that the NFL’s single-entity

status in the present context turns entirely on whether

the league’s member teams can compete with one

another when licensing and marketing their intellectual

property. American Needle’s proposed approach is one

step removed from saying that the NFL teams can be a

single entity only if the teams have “a complete unity of

interest”—a legal proposition that we have rejected as

“silly.” Bulls II, 95 F.3d at 598. As we have explained,

“Copperweld does not hold that only conflict-free enter-

prises may be treated as single entities”; “[e]ven a single

firm contains many competing interests.” Id. at 598 (dis-

No. 07-4006 15

cussing Robert G. Eccles, Transfer Pricing as a Problem of

Agency, in Principals and Agents: The Structure of Business

151 (1985)). Thus, though the several NFL teams could

have competing interests regarding the use of their in-

tellectual property that could conceivably rise to the

level of potential intra-league competition, those inter-

ests do not necessarily keep the teams from functioning

as a single entity. Id. at 597-98. We therefore cannot fault

the district court for not considering whether the NFL

teams could compete against one another when licensing

and marketing their intellectual property.

And with that said, American Needle’s assertion that

the NFL teams have deprived the market of independent

sources of economic power unravels. Certainly the NFL

teams can function only as one source of economic power

when collectively producing NFL football. Asserting that

a single football team could produce a football game is

less of a legal argument then it is a Zen riddle: Who wins

when a football team plays itself? See Nat’l Collegiate

Athletic Ass’n v. Bd. of Regents, 468 U.S. 85, 101 (1984)

(“ ‘[Some] activities can only be carried out jointly. Perhaps

the leading example is league sports. When a league of

professional lacrosse teams is formed, it would be point-

less to declare their cooperation illegal on the ground that

there are no other professional lacrosse teams.’ ” (quoting

Robert Bork, The Antitrust Paradox 278 (1978))); Bulls II, 95

F.3d at 599 (“[T]he NBA has no existence independent of

sports. It makes professional basketball; only it can make

‘NBA Basketball’ games . . . .”). It thus follows that only

one source of economic power controls the promotion of

16 No. 07-4006

NFL football; it makes little sense to assert that each

individual team has the authority, if not the responsibility,

to promote the jointly produced NFL football. Indeed, the

NFL defendants introduced uncontradicted evidence

that the NFL teams share a vital economic interest in

collectively promoting NFL football. After all, the league

competes with other forms of entertainment for an audi-

ence of finite (if extremely large) size, and the loss of

audience members to alternative forms of entertainment

necessarily impacts the individual teams’ success. See Bulls

II, 95 F.3d at 597; see also Brown, 518 U.S. at 248 (“[T]he

[teams] that make up a professional sports league are not

completely independent economic competitors, as they

depend upon a degree of cooperation for economic sur-

vival.”); Nat’l Football League v. N. Am. Soccer League, 459

U.S. 1074, 1077 (1982) (Rehnquist, J., dissenting) (“The

NFL . . . competes with other sports and other forms of

entertainment in the entertainment market. Although

individual NFL teams compete with one another on the

playing field, they rarely compete in the market place.”).

But most importantly, the record amply establishes that

since 1963, the NFL teams have acted as one source of

economic power—under the auspices of NFL Proper-

ties—to license their intellectual property collectively

and to promote NFL football. Tellingly, American Needle

does not dispute that the NFL teams collectively license

their intellectual property to promote NFL football; in

fact, when opposing the NFL defendants’ motion for

summary judgment, American Needle relied on NFL

Properties’s Articles of Incorporation, which state that the

teams formed NFL Properties “[t]o conduct and engage

No. 07-4006 17

in advertising campaigns and promotional ventures on

behalf of the [NFL] and the member [teams].” And our

review of the record reveals no evidence that requires us

to question the purpose of the teams’ licensing agreement.

Simply put, nothing in § 1 prohibits the NFL teams

from cooperating so the league can compete against

other entertainment providers. Indeed, antitrust law

encourages cooperation inside a business organiza-

tion—such as, in this case, a professional sports league—to

foster competition between that organization and its

competitors. See Bulls II, 95 F.3d at 599. Viewed in this

light, the NFL teams are best described as a single

source of economic power when promoting NFL football

through licensing the teams’ intellectual property, and we

thus cannot say that the district court was wrong to so

conclude.

Moving on, the failure of American Needle’s § 1 claim

necessarily dooms its § 2 monopolization claim. As a single

entity for the purpose of licensing, the NFL teams are free

under § 2 to license their intellectual property on an

exclusive basis, see Cook Inc. v. Boston Scientific Corp., 333

F.3d 737, 740 (7th Cir. 2003), even if the teams opt to reduce

the number of companies to whom they grant licenses,

see Bulls II, 95 F.3d at 598 (“To say that participants in an

organization may cooperate is to say that they may control

what they make and how they sell it: the producers of Star

Trek may decide to release two episodes a week and

grant exclusive licenses to show them, even though this

reduces the number of times episodes appear on TV in a

given market . . . .”); Gregory J. Werden, Antitrust Analysis

18 No. 07-4006

of Joint Ventures: An Overview, 66 Antitrust L.J. 701, 730-31

(1998) (“An antitrust claim based solely on a single firm’s

denial of a license to a trademark would readily be dis-

missed . . . .”). As such, American Needle has no colorable

claim that the NFL teams and NFL Properties created a

monopoly by awarding Reebok the exclusive headwear

licensing contract. See Cook Inc., 333 F.3d at 740 (discussing

competitive effects of exclusive-licensing agreements);

Bulls II, 95 F.3d at 598. The district court was therefore

correct to grant summary judgment to the NFL defendants

on American Needle’s § 2 monopolization claim.

III. C ONCLUSION

We A FFIRM the district court’s judgment.

8-18-08