Petition — Pro-Football, Inc. v. Hecht
Supreme Court brief1978
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Supreme Court, U. K
FILED
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) Mar 20 1978
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IN THE
Supreme Court of the United States
OcrosBeR TERM, 1977
PBo-FoorgALL, INc., and
District or COLUMBIA ArMorRY BOARD, Petitioners,
U.
NoRMAN F. HECHT, ET XL., Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
CovINGcTton & BURLING
JAMES C. McKay
Paul J. TAGLIABUE
Greoe H. LEvy
888 Sixteenth Street, N.W.
Washington, D.C. 20006
(202) 452-6000
Attorneys for Petitioner Pro-Football,
Inc.
CORPORATION COUNSEL, DISTRICT OF
CoLUMBIA
JoHN R. RISHER
Ricwarp W. BARTON
14th and E Streets, N. W.
Washington, D.C. 20004
Attorneys for Petitioner District
of Columbia Armory Board
TABLE OF CONTENTS
Page
„„ 1
. ...... „„ „ „„ „„ „„ „„ 2
(rn rr 2
Srarurzs INVvOLIyI . „ 3
r ĩ ˙² »ein esse +
REASONS FOR GRANTING THE WRIT .........-0000sseee: 8
I. TRR Court or Appgais’ Decision Conriicts WITH
Tuis Court’s ConTroLtine Decisions .......... 11
II. Tue Court or Apprats’ Decision Conriicts WITH
Decisions or THE Fmsr, Sr, anp NintH Cm- ,
«PEP EY ET eTPEPETITINETTTT e eee TL TEL 1
r oc puke hi chine ͤͤ Dr te coburn 27
Appendix A—Opinion of the United States Court of
Appeals for the District of Columbia Circuit (April
r c la
Appendix B—Opinion of the United States District
Court for the District of Columbia ............. 35a
Appendix C—Opinion of the United States Court of
Appeals for the District of Columbia Circuit (De-
— 3 Pry rerrrry rrr re 45a
„ PETTITT CT TE TTT TT TTT Ty Ce 77a
INDEX TO CITATIONS
CasEs:
Allegheny Uniforms v. Howard Uniform Co., 384 F.
X. „ „ Saiies techie tbilonewess 25
ostery
14, 15, 17, 19, 24
ii Index to Citations Continued
Page
City of Fairfax v. Fairfax Hospital Ass’n, —— F. 2d
1977-2 Trade Cas. f 61,598 (4th Cir. 1977) . .20, 24
City of Lafayette v. Louisiana Power d Light Co., S.
Ct. No. 76-864, October Term 1976 ........ 9, 15, 16, 21
Consumers Union of U.S., Inc. v. Rogers, 352 F. Supp.
1319 (D.D.C. 1973), aff’d and modified sub nom.,
Consumers Union of U.S., Inc. v. Kissinger, 506
F.2d 136 (D.C. Cir. 1974), cert. denied, 421 U.S.
neee enen 19
Continental Bus System, Inc. v. City of Dallas, 386 F.
r e 24
District of Columbia v. Carter, 409 U.S. 418 (1973) ... 18
District of Columbia v. Murphy, 314 U.S. 441 (1941) . 17-18
Duke & Co., Inc. v. Foerster, 521 F.2d 1277 (3d Cir.
i cetteh tcetestlaccdhesdnahenéeundsaad-+ ¢ 20, 25
Eastern Railroad Presidents Conference v. Noerr
Motor Freight, Inc., 365 U.S. 127 (1961) 22
Friend v. Lee, 221 F. 2d 96 (D. C. Cir. 1955) .......... 21
Georgia v. Evans, 316 U.S. 159 (1942) .............. 16, 17
Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) .. 9, 12,
14, 15, 19, 24
Gonzalez v. Freeman, 334 F. 2d 570 (D.C. Cir. 1964) .. 21
Gordon v. New York Stock Exchange, Inc., 422 U.S.
r ⅛˙ u...... a 13
Heath v. Aspen Skiing Corp., 1971 Trade Cas. {| 73,560
ß ͤD¹ͤůuiuͥĩi ³WQQ se 25
Hertz Drive- Ur- Self System, Inc. v. Tucson Airport
Authority, 81 Ariz. 80, 229 P.2d 1071 (1956) ..... 21
Hughes Tool Co. v. Trans World Airlines, Inc., 409
r tie pipe = petite Cael
Kalvar Corp. v. United States, 543 F.2d 1298 (Ct. Cl.
777777 ²˙ m 21
Turek v. Pleasure Driveway d Park District, 557 F.2d
. error es epee 20, 25
Meat Cutters v. Jewel Ta Go., 381 U.S. 676 (1965) .. 13
Murdock v. City of Jacksonville, 361 F. Supp. 1083
D . 24, 25
New York v. United States, 326 U.S. 572 (1946) ...... 23
Padgett v. Louisville q Jefferson County Air Board,
492 F. 2d 1258 (6th Cir. 1974) .............. 10, 19, 23
Panama City v. Seven Seas Restaurant, Inc., 180 So.
2d 190 (Fla. APP. Fer 21
Parker v. Brown, 317 U.S. 341 (1943) 9, 11, 12, 17,
A A
Index to Citations Continued iii
Page
Pfizer v. Government of India, —— U.S. ——, 98 8.
Ob. BBE (IBTE) oo cccccccccccccscvscecccscscses 16, 17
Silver v. New York Stock Exchange, 373 U.S. 341 (1963) 21
State of New Mexico v. American Petrofina, Inc., 501
F.2d 363 (9th Cir. 197 4c) 12, 20, 21
Sun Valley Disposal Co. v. Silver State Disposal Co,,
420 F.2d 341 (9th Cir. 1969) ............ 10, 14, 19, 23
3 Co. v. Nashville Coal Co., 365 U.S. 320 8
c
Trans World Associates, Inc. v. City and County of
Denver, 1974-2 Trade Cas. {| 75,293 (D. Colo. 1974) 23-24
United States v. Cooper Corp., 312 U.S. 600 (1941) 16, 17, 18
United States v. National Ass’n of Securities Dealers,
Inc., 423 U.S. GO4 (197%6)) 4 2 22 13
a States v. Topco Associates, Inc., 405 U.S. 596 *
„ ˙ enn
Ventura Port District v. Taxpayers, 53 Cal. 2d 227, 347
, eee 21
White Motor Co. v. United States, 372 U.S. 253 (1963) . 26
E. W. Wiggins Airways, Inc. v. Massachusetts Port
Authority, 362 F.2d 52 (Ist Cir.), cert. denied, 385
§ §. rrr. 10, 13, 14, 19, 22, 23, 25
STaTUTEs: .
Armed Services Procurement Act, 10 U.S.C. § 2314... 14
Clayton Act, 15 U.S.C. §§ 12 et seg. 16-17
District of Columbia Stadium Act, 2 D.C. Code §§ 1720
— cedbescbundnnsocsetscesssocenes 3, 4, 5, 7, 8
Robinson-Patman Act, 15 U.S.C. §§ 13 et seg. 21
Sherman Anti-Trust Act, 15 U.S.C. §§1-7 ......... passim
JJ Eddie dhbyededNesescccccccccecece 3
Z 2
MISCELLANEOUS:
Comment, The State Action Exemption In Antitrust:
From Parker v. Brown to Cantor v. Detroit Edison
Nen 12
iv Index to Citations Continued
Comp. Gen. B-176223 (Sept. 25, 1972) ...............
Comp. Gen. B-178928 (July 17, 1973))))
Hearings on S. 3736 and H.R. 12162 bef i
tees of the Senate and House —— 4
District of Columbia, 85th Cong., 2d Sess. (1968)
Hearings on H.R. 8392 before Subcommittee No. 2
the House Committee on the Distri — -
86th Cong., Ist Sess. (1959) g a : 1 co
H.R. Rep. No. 109, 80th Cong., Ist Sess. (1947)
Office of the Secretary of Defense, Military Prime Con-
tract Awards, October 1976-
in press) .......... 5 er September 1977 —
38 Op. Att’y Gen. 539 (1936) 3
8. Rep. No. 571, 80th Cong., 1st Sess. (1947)
IN THE
Supreme Court of the United States
Octosper TERM, 1977
No.
Pro-FoorsaL., Inc., and
District or COLUMBIA ArMorY Boarp, Petitioners,
V.
Norman F. Hecut, ET L., Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Petitioners pray that a writ of certiorari issue to
review the decisions of the United States Court of
Appeals for the District of Columbia Circuit in its
cases Nos. 24,446 (April 27, 1971) and 75-1819 (De-
cember 20, 1977), both entitled Hecht, et al. v. Pro-
Football, Inc., et al.
Petitioners previously filed a petition for a writ of
certiorari seeking review of the Court of Appeals’
decision in No. 24,446, reported at 444 F. 2d 931 (D.C.
Cir. 1971), and reproduced as Appendix A to this Pe-
tition (pp. 1a-34a, infra). That petition was denied by
this Court, with Justices Stewart, White, and Marshall
2
of the opinion that the writ should have been granted
404 U.S. 1047 (1971). 1
The initial opinion of the Court of Appeals had re-
versed a summary judgment entered in favor of peti-
tioners by the United States District Court for the
District of Columbia in an opinion reported at 312 F.
Supp. 472, and reproduced as Appendix B to this
Petition (pp. 35a-44a, infra).
On remand following this Court’s denial of certio-
rari, the case was tried to a jury. After a lengthy trial,
the jury returned a verdict in favor of petitioners.
That verdict was reversed by the Court of Appeals on
December 20, 1977, in No. 75-1819. The second opin-
ion of the Court of Appeals is reproduced as Appendix
C to this Petition (pp. 45a-76a, infra).*
JURISDICTION
The jurisdiction of this Court is invoked under 28
U.S.C. § 1254(1). Review of the initial decision of the
Court of Appeals is now proper. See Hughes Tool Co.
; Trans World Airlines, Inc., 409 U.S. 363, 365 n.1
1973). 2
QUESTION PRESENTED
Whether a government agency created by Congress
and a private party may be liable for a violation of the
Sherman Act based on the terms of a lease for the use
of a public facility when the lease was negotiated in
good faith and at arm’s length, the government agency
was acting within express discretionary authority ac-
corded it by Congressional statute, and the terms of the
References to the Appendices to this Petition are esignated
146 77 d
App. — followed by identification of th — pendix an
the page number. F.., App. A 2a. eins * 7
3
lease were directed at advancing a valid governmental
purpose.
STATUTES INVOLVED
Sections 1, 2 and 3 of the Sherman Act and perti-
nent provisions of the District of Columbia Stadium
Act are set forth in Appendix D to this Petition (pp.
7T7a-80a, infra).
STATEMENT
The Court of Appeals held in its first opinion that
the Sherman Act covered a public contract between a
government agency created by Congress (the Armory
Board) and a private party (the Redskins) for the
leasing of a public facility (RFK Stadium). In its sec-
ond opinion, the Court of Appeals referred to its initial
decision, noting that it had concluded ‘“‘that Congress
had evinced no intention“ in the stadium legislation to
immunize the governmental lease from the Sherman
Act. App. C 48a n.5.
In 1957, Congress authorized the Armory Board ‘‘to
construct, maintain, and operate a stadium“ so as to
provide the people of the District of Columbia with a
stadium suitable for holding athletic events and other
activities and events of a nature requiring such a fa-
cility ....’’ District of Columbia Stadium Act § 2, 71
Stat. 619 (2 D.C. Code § 1720). The final enabling stat-
ute authorized construction of the stadium on land to
be acquired by the Department of the Interior, by con-
demnation if necessary, with construction to be fi-
nanced by bonds issued by the Armory Board. D.C.
Stadium Act §§ 2-4 (2 D. C. Code §§ 1720-22). The bonds
‘The Armory Board was established by Congress in 1948. 62
Stat. 339 (2 D.C. Code § 1702).
4
were to be repayable as to principal within a period
not to exceed thirty years“ (2 D.C. Code § 1722) and
were to be guaranteed by the United States Treasury.
The Department of the Interior was directed to enter
into a contract with the Armory Board for the con-
struction, maintenance, and operation of the stadium.
D.C, Stadium Act § 3 (2 D.C. Code § 1721). The Board
was given the broadest possible discretion in carrying
out its functions under the statute:
„In order to carry out the purposes of this sub-
chapter, the Board is hereby authorized without
regard to any other provision of law, but subject
to any contract entered into with the Secretary of
the Interior under section 2-1721—
**(1) to determine all questions concerning the
use of the stadium for the purposes of this sub-
chapter;
8) to rent or lease from time to time for any
of the p cc. of this subchapter, all or any part
or parts of the stadium including any or all struc-
tures, equipment or facilities of the stadium, at
such rental values and for such periods of time as
the Board shall determine . D. C. Stadium Act
§ 5 (2 D.C. Code § 1723) (emphasis supplied).
Thus, under the enabling act, all leasing decisions were
left to the judgment and discretion of the Armory
Board and the Board was given authority to deter-
mine all such questions without regard to any other
provision of law.’’ Id. (emphasis supplied).
In enacting this legislation, Congress gave no indi-
eation that it intended the Armory Board to be subject
to the Sherman Act in leasing and operating the sta-
5
dium. Nor did the Armory Board or any party with
which it might deal have any reason to believe that the
Armory Board was subject to such limitations.
Throughout the period in which Congress was con-
sidering the stadium legislation, it was accepted that
the success of the stadium venture depended on the
Armory Board’s securing long-term commitments for
the use of the stadium from the two projected prin-
cipal tenants, the Washington Senators baseball team
and the Washington Redskins football team. During
hearings and debates, it was made clear to Congress
that no stadium would be possible unless the Armory
Board was able to obtain a long-term lease from the
Redskins."
On December 24, 1959, the Armory Board and the
Redskins, after what the Court of Appeals described
as ‘‘arm’s-length, hard bargaining between the two
parties for approximately a year and a half,” App. A
4a, entered into an agreement under which the Red-
skins committed themselves to rent the stadium for
* Hearings on S. 3736 and H.R. 12162 before Subcommittees of
the Senate and House Committees on the District of Columbia, 85th
Cong., 2d Sess. 21 (1958). In later testimony on a 1959 amendment
to the Stadium Act, the Armory Board’s Chairman, in discussing
the lease negotiations with the Washington Senators and the Red-
skins, noted that ‘‘we are desperately anxious to get these contracts
in order to be able to float our bond issue.’’ Hearings on H.R. 8392
before Subcommittee No. 2 of the House Committee on the District
of Columbia, 86th Cong., Ist Sess. 18-20 (1959). See also 104 Cong.
Ree. 18787 (1958); 103 Cong. Rec. 6826 (1957). As amended in
1958, the Stadium Act directs that the stadium be ‘‘constructed sub-
stantially in accordance with the plans for such stadium’’ con-
tained in a 1958 engineering and economic study. D.C. Stadium
Act §2 (2 D.C. Code § 1720). That study was based on the ex-
pectation that the Senators and the Redskins would be the chief
sources of revenu
their home games beginning with the 1961 season
and for 29 seasons thereafter. The Board, in turn,
agreed not to rent the stadium to another professional
football team during the term of the lease.’
Without such a reciprocal commitment by the Arm-
ory Board, there would have been no lease and no
stadium, The action by the Armory Board in agreeing
to the exclusive provision, in light of the necessity of
obtaining a 30-year lease from the Redskins, clearly
served the stadium’s interests and clearly fell within
the authority granted it by Congress to determine
all questions concerning the use of the stadium“ and
to lease the stadium ‘‘at such rental values and for
such periods of time’’ as it shall determine.
The respondents are individuals who claim to have
been promoters pursuing a second professional foot-
ball franchise for the District of Columbia in a league
other than the Redskins’ league, the National Foot-
ball League. Respondents’ claims are based solely on
the exclusive professional football use terms of the
lease between the Armory Board and the Redskins—
which respondents assert thwarted their ambitions to
establish a team in the District. ‘‘There is no conten-
tion,“ the Court of Appeals said, that there was any
fraud, misrepresentation, or overreaching on either
side.“ App. A 4a.
Respondents seek treble damages and injunctive re-
lief against alleged violations of Sections 1, 2 and 3
of the Sherman Act. The sole remaining defendants,
* Construction of the stadium, first known simply as D.C. Stadium
and since 1968 as Robert F. Kennedy Memorial Stadium, began in
1959. The stadium was opened in 1961.
7
the petitioners here, are Pro-Football, Inc. (the Red-
skins) and the Armory Board.“
The District Court, in granting petitioners’ motion
for summary judgment, reasoned that ‘‘[n]o violation
of the [Sherman] Act can be made out even where there
is a restraint of trade or monopolization if it resulted
from valid governmental action.“ App. B 44a. The
District Court, relied, inter alia, on decisions of this
Court, as well as on decisions of the First and Ninth
Cirevits, holding that activities similar to those in-
volved herein were not subject to challenge under the
Sherman Act.
The Court of Appeals reversed the District Court’s
judgment, ruling that the validity of the thirty-year
lease between the appellees Armory Board and Pro-
Football, Inc., must be tested in accordance with the
United States antitrust laws as usually applied to con-
tracts between private parties. App. A 33a.“
»The claims against the National Football League, a defendant
at the time of the Court of Appeals’ first decision, were dismissed
with prejudice prior to trial. Plaintiff seeks only injunctive relief
as to the Armory Board, although the Board and the Redskins are
charged as joint tortfeasors with violating the Sherman Act.
* To the extent that the Court of Appeals relied upon a construc-
tion of the Stadium Act rather than the Sherman Act, the Court
thoroughly misconstrued that Act. Thus, the Court read a pro-
vision of the Stadium Act that required competitive bidding on
property and equipment contracts in excess of $3,000 as expressing
„Congress concern to preserve the competitive spirit in larger
contract offering. App. A 29a. But Congress manifested no
such pro-competition attitude with respect to large contracts as the
Court of Appeals attributed to it. The Armory Board’s largest
single contract would be the contract for construction of the sta-
dium, and another section of the Act specifically authorized the
Board to provide for the construction of the stadium ‘‘by such
means as it determines will most effectively carry out this [Act]
8
The fact record necessary for this Court’s review is
fully developed. This case has twice been remanded
by the Court of Appeals, the second remand following
a jury trial in which the government agency’s reasons
for entering into the lease agreement were thoroughly
examined. If further proceedings in the District Court
lead to another appeal, such an appeal is likely to result
from the continuing confusion that the unprecedented
“governmental act“ ruling of the Court of Appeals
has engendered.
REASONS FOR GRANTING THE WRIT
The Court of Appeals has decided an important
question of Federal antitrust law that has not been,
but should be, settled by this Court and has decided
that question in a manner that can have a major im-
pact on the contracting practices of all government
agencies, state, local, or Federal. In reviewing an action
of a government agency under a Congressional statute
prescribing no antitrust limitations on the agency’s
conduct, the Court ruled that the agency’s contracting
practices are subject to the same antitrust standards
as are routinely applied to contracts between private
parties. The Court’s ruling is unique, because the gov-
ernment agency to which these standards were applied
was established by the very legislative body that en-
acted the Sherman Act—the Congress of the United
States.
(including, but not limited to, a negotiated contract).’’ D.C. Sta-
dium Act §2 (2 D.C. Code § 1720). Indeed, the limited require-
ment of competitive bidding on property and equipment contracts
plainly suggests that other contracts, including leases, did not have
to be let on a competitive basis.
9
Heretofore, it has been accepted that the contracting
practices of government agencies created by Congress
are not subject to the standards of the Sherman Act.
This acceptance has proceeded on the premise that the
Sherman Act and other antitrust laws were never in-
tended to be applicable to the actions of Federal agen-
cies unless Congress specifically so declared. That
understanding has now been reversed by the Court of
Appeals, with the Court ruling that antitrust law
principles developed in private business contexts apply
equally to the contracting actions of Congressionally-
created agencies unless Congress has specifically pro-
vided to the contrary.
This issue was not addressed in Parker v. Brown,
317 U.S. 341 (1943), which required a reconciliation
of the Sherman Act with a state regulatory enactment
that directed private conduct in conflict with the Sher-
man Act. Nor is the present issue resolved by this
Court’s rulings in Goldfarb v. Virginia State Bar, 421
U.S. 773 (1975), in Cantor v. Detroit Edison Co., 428
U.S. 579 (1976), or in Bates v. State Bar of Arizona,
97 S. Ct. 2691 (1977), which dealt with the questions of
whether essentially private conduct undertaken with
the approval, acquiescence, or at the direction of state
legislative, regulatory, or judicial authority is entitled
to antitrust immunity. Nor will the current issue be
resolved by this Court’s decision in City of Lafayette
v. Louisiana Power & Light Co., No. 76-864, currently
pending before this Court, since that case is concerned
with the actions of a municipality acting under author-
ity of state law.
The decision of the Court of Appeals is without
precedent. It is unsupported by the language or history
of the Sherman Act or by decisions of this Court. It
10
stands for the proposition that per se rules, tie-in and
reciprocity principles, exclusive dealing and maximum
pricing concepts, and all other limiting antitrust
principies are equally applicable to Federal agency
contracts, regardless of the government agency’s ob-
jectives and interests in entering into contracts on
such terms. If given general effect, the Court’s ruling
would bear heavily upon the operations of Congres-
sionally-created agencies and other units of govern-
ment that perform their public functions in whole or
in part through contracting with private firms and that
enter into contracts with interests and objectives dif-
fering broadly from those influencing private busi-
ness dealings.
The decision below is also in conflict with the deci-
sions of other Courts of Appeals that have rejected
a comparable antitrust law application even where
state and municipal agencies were concerned. ZE. W.
Wiggins Atrways, Inc. v. Massachusetts Port Author-
ity, 362 F.2d 52 (Ist Cir.), cert. denied, 385 U.S. 947
(1966); Sun Valley Disposal Co. v. Silver State Dis-
posal Co., 420 F.2d 341 (9th Cir. 1969); Padgett v.
Louisville & Jefferson County Air Board, 492 F.2d
1258 (6th Cir. 1974). More broadly, the decision below
misconstrues and rejects the decisions of this Court
delineating the role of the antitrust laws in relation
to valid governmental action and to private action
claimed to be immunized by governmental action.
This Court has recognized the need for clarification
of its ‘‘governmental act’’ decisions in state and mu-
nicipal agency contexts. E. g., Cantor; City of Lafay-
ette. It is equally important that it do so in a context
where government agencies acting ursuant to Con-
gressional authorization have entered into contracts
11
claimed to be vulnerable under private antitrust law
principles.
I. THE COURT OF APPEALS’ DECISION CONFLICTS WITH
THIS COURT’S CONTROLLING DECISIONS
The Court of Appeals’ attempted accommodation of
the Sherman Act and the conflicting Stadium Act was
grounded on two essential lines of analysis—each
erroneous. First, the Court of Appeals improperly
read Parker v. Brown, 317 U.S. 341 (1943). Second,
it erroneously assumed that the Sherman Act applies
to the public contracts of Congressionally-created
agencies unless Congress expressly states the contrary,
and the Court misinterpreted this Court’s decisions
regarding the Sherman Act’s application to private
business conduct that is subject to regulation by a
Federal agency.
The court below read Parker v. Brown as holding
that the California agricultural statute was not sub-
ject to the Sherman Act because the state’s regulatory
scheme was consistent with the Federal Agricultural
Adjustment Act. App. A 10a. It thus concluded that
Parker validated California’s exercise of sovereign
state power in regulating state agricultural matters
not because governmental action is beyond the scope
of the Sherman Act, but simply because the state
action took a form that Congress had previously
adopted in establishing Federal agricultural policy.
On this basis, the Court of Appeals explicitly rejected
what it characterized as a theory, that where there
can be established unequivocal state action the antitrust
laws do not apply.“ App. A 15a.
But this Court’s opinion in Parker and recent dis-
cussions of Parker demonstrate the error in the Court
12
of Appeals’ analysis. In considering the Sherman Act
issue in Parker, this Court did not mention the Fed-
eral Agricultural Adjustment Act—much less rest its
decision on any similarity between that Act and the
California agricultural statute. 317 U.S. at 350-52.
Further, the Court of Appeals’ reading of Parker
finds no support in Goldfarb v. Virginia State Bar,
421 U.S. 773, 788-92 (1975), or in any of the several
opinions in Cantor v. Detroit Edison Co., 428 U.S. 579
(1976), which analyzed Parker in minute detail. See
Cantor, 428 U.S. at 587-92, 603-05, 615-21.
The Court of Appeals was equally in error in pre-
suming that the Sherman Act fully applies to the pub-
lic contracts of governmental agencies in the ab-
sence of unequivocal exemption therefrom, either by
specific statutory language or by a purpose to enforce
other policies of equal or greater importance... App.
A 28a.“ The Court was also wide of the mark in re-
lying on decisions of this Court and lower Federal
courts that have considered whether private conduct
in a Federally regulated industry is immunized from
the antitrust laws. App. A 22a-27a. In those cases, the
challenged private conduct did not involve public con-
tracts by governmental agencies designed to serve pub-
lie purposes. Instead, those cases involved private
activity unquestionably subject to the Sherman Act in
*The court below articulated a quite open-ended, six-part bal-
ancing test for determining whether governmental action should be
immune from the Federal antitrust laws. App. A 9a. That test
has been criticized by both the Ninth Circuit in State of New
Mexico v. American Petrofina, Inc., 501 F.2d 363, 371 (1974), and
by commentators as inconsistent with Parker v. Brown and on
other grounds. See, e.g., Comment, The State Action Exemption In
Antitrust: From Parker v. Brown to Cantor v. Detroit Edison Co.,
1977 Duke L. J. 871, 896-97.
13
the absence of a regulatory overlay.’ Unlike here, the
issues in such cases related to the presence or absence
of express authority in the regulatory agency to confer
immunity and to the private antitrust defendants
ability to demonstrate that the objectives of a Federal
regulatory scheme require an implied repeal’’ of the
antitrust laws.
This case is, however, fundamentally different. The
issue is not one of immunity for private conduct, but
of whether a government agency can itself be liable
under the Sherman Act for taking action within its
discretion under its enabling statute and directed at a
valid governmental purpose. As stated by the First
Cireuit, this issue does not involve any question of
immunity, since there was no attempt on the part of
Congress to impose liability in the first place.“ Z. W.
Wiggins Airways, Inc. v. Massachusetts Port Author-
ity, 362 F.2d 52, 56 (1st Cir.), cert. denied, 385 U.S.
947 (1966). If the Sherman Act does not extend to
such governmental action, surely that Act cannot in-
directly be brought to bear by applying it to a private
party that enters into a valid contract with a govern-
ment agency. Cf. Meat Cutters v. Jewel Tea Co., 381
U.S. 676, 730 (1965) (Goldberg, J., concurring)
Prior to the decision of the court below, the general
understanding had been that specific Congressional ac-
tion would be required to subject public contracts to the
Sherman Act—and the prevailing authority made that
general understanding explicit as to the contracts of
state governmental units. E. W. Wiggins Airways, Inc.
Recent illustrations of the class of cases erroneously invoked by
the Court of Appeals are Gordon v. New York Stock Exchange,
Inc., 422 U.S. 659, 691 (1975) and United States v. National Asso-
ciation of Securities Dealers, Inc., 422 U.S. 694, 719, 729-80 (1975).
14
v. Massachusetts Port Authority, 362 F.2d 52 (Ist
Cir.), cert. denied, 385 U.S. 947 (1966); Sun Valley
Disposal Co. v. Silver State Disposal Co., 420 F.2d 341
(9th Cir. 1969).* As to the public contracts of Congres-
sionally-created agencies, the decision of the court be-
low continues to stand alone.“
Petitioners further submit that the Court of Ap-
peals’ decision is inconsistent with the three pertinent,
recent decisions of this Court—although we recognize
that each of these decisions dealt with state govern-
mental action. Bates v. State Bar of Arizona, —— U.S.
, 97 S. Ct. 2691 (1977) ; Cantor v. Detroit Edison
Co., 428 U.S. 579 (1976); and Goldfarb v. Virginia
State Bar, 421 U.S. 773 (1975).
In Bates, this Court held the Arizona Supreme
Court’s regulation of attorney advertising to be out-
side the scope of the Sherman Act, emphasizing that
See pp. 22-24, infra, for additional discussion of these decisions.
* Under the Court of Appeals’ six-part balancing test, App. A
9a, the contracts of many Congressionally-created agencies could
well be subject to the antitrust laws. As to contracts of the Depart-
ment of Defense and NASA, for example, the Armed Services Pro-
curement Act, granting these agencies their contracting authority,
specifies the laws that are inapplicable to agency contracts without
including the antitrust laws, 10 U.S.C. § 2314, and competitive
principles were intended to control the great bulk of contracting
under that Act. S. Rep. No. 571, 80th Cong., Ist Sess. 1-6, 12-13,
15-16 (1947); H.R. Rep. No. 109, 80th Cong., Ist Sess. 3-6 (1947).
In denying a protest of a contract award by the Air Force, the
Comptroller General has broadly stated that Federal government
contracting officers are not ‘‘required to consider the antitrust laws
in the execution of their responsibilities. and that the im-
position of such a requirement upon the contracting officers of the
Government would impose an intolerable burden and inordinately
delay the procurement process. Comp. Gen. B-1762238 at 161, 166-
67 (Sept. 25, 1972) (emphasis supplied).
15
the antitrust claims were against the State“ and that
the State had a direct and independent public interest
in the challenged regulations. 97 S. Ct. at 2697-98.
Goldfarb and Cantor, unlike Bates, considered the
application of the Sherman Act to private party con-
duct taken in conjunction with differing measures of
state action. In Goldfarb, the Court held that neither
the Virginia State Bar, a state agency ‘‘for some lim-
ited purposes, nor the county bar, a private organi-
zation, was entitled to a Sherman Act exemption be-
cause they had ‘‘voluntarily joined in what is essen-
tially a private anticompetitive activity ....’’ 421 U.S.
at 791-92. While Goldfarb did not rule on the applica-
tion of the Sherman Act to a government contract, its
analysis of the pertinent considerations does not sup-
port the Court of Appeals’ rationale here.
Similarly, while Cantor did not directly deal with
the present issue, the several opinions there strongly
suggest that a compelling, if not clearcut, case
for the inapplicability of the Sherman Act would exist
where, as in the present suit, government officials
are sued and the challenged action directly involves a
valid exercise of governmental authority to serve a
public purpose. 428 U.S. at 585-92, 600-01, 615-17. As
Mr. Justice Blackmun later stated for a unanimous
Court in Bates, Cantor ‘‘would have been an entirely
different case if the claim had been directed against
a public official or public agency rather than against
a private party.“ 97 S. Ct. at 2697. If that is correct,
the decision of the court below cannot be permitted to
stand.”
1 City of Lafayette v. Louisiana Power & Light Co., No. 76-864,
October Term, 1976, presents the related question of whether Con-
gress intended the Federal antitrust laws to apply to the actions of
16
Nor can the Court of Appeals’ decision be recon-
ciled with this Court’s decisions that have interpreted
the term ‘‘person’’ in the Sherman Act in the context
of governmental entities as antitrust plaintiffs.”
United States v. Cooper Corp., 312 U.S. 600, 614
(1941) (the United States is not a ‘“‘person”’ [plain-
tiff] under Section 7); Georgia v. Evans, 316 U.S.
159, 162 (1942) (a state is a ‘‘person’’ [plaintiff] under
the Sherman Act); Pfizer v. Government of India,
— U.S. ——, 98 S. Ct. 584, 590 (1978) (a foreign
sovereign is a person“ [plaintiff] under the Clayton
state governmental units. The amended antitrust counterclaim
against the two cities in that action alleged that the cities had
violated the antitrust laws in the operation of their municipal elec-
tric utility systems by, among other things, entering into various
covenants and contracts with bondholders, customers, and others
that had anticompetitive effects. If this Court reverses the Fifth
Circuit in City of Lafayette and holds that the challenged conduct
of the cities is not subject to the Sherman Act, it may be appro-
priate for this Court to vacate the decision of the Court of Appeals
below and to remand the present suit for reconsideration in light of
the decision in City of Lafayette. On the other hand, in view of the
unique, Federal aspects of the present case, an affirmance of the
Fifth Cireuit in City of Lafayette ought not preclude review of
this case.
u The Sherman Act prohibits unlawful conduct by persons.
Section 2 applies by its terms to ‘‘every persen’’ who shall do cer-
tain acts either independently or with ‘‘any other person or per-
sons.’’ App. D 77a. Sections 1, 2 and 3, in designating those to be
criminally liable, refer to ‘‘every person’’ who shall engage in
the prohibited conduct. Id. And Section 8 defines the term per-
son’’ to include corporations and associations existing under the
laws of the United States, Territories, any State, or any foreign
country. 15 U.S. C. § 7.
Respondents’ Count 1 is based upon Sections 1 and 3 of the
Sherman Act (the latter section dealing specifically with acts with-
in the District of Columbia). Respondents’ Count 2 is based upon
Sections 2 and 3 of the Act.
17
Act). These decisions establish that the term person“
is not a word of art with a uniformly fixed meaning
and that the scope of the Sherman Act is to be re-
solved in the light, not only of the policy intended to
be served by the enactment, but, as well, by all other
available aids to construction.’’ Cooper, 312 U.S. at
605.
The Court of Appeals effectively held that a Con-
gressionally-created government agency was a ‘‘per-
son“ fully subject to the Sherman Act in the same
manner as any private business, but it did so without
considering any of the textual and policy factors that
this Court found dispositive in Cooper, 312 U.S. at
606-08, in Georgia v. Evans, 316 U.S. at 161-62, and in
Pfizer, 98 S. Ct. at 590.“ Further, the interpretation of
the court below conflicts with Cooper, which declined
to read the term person' as encompassing the United /
States, in part because such a reading would make the
United States liable to suit for treble damages.“ 312
U.S. at 606.“
The Court of Appeals’ failure of analysis is un-
usually serious in view of the District of Columbia’s
unique position in our nation’s governmental structure,
see District of Columbia v. Murphy, 314 U.S 441, 452
12 The Court, for example, gave no consideration to the possible
criminal liability of District of Columbia officials, to the poten-
tial of joint tortfeasor liability, to the effects of treble damage
liability on the governmental treasury, to the effects that 4 rescis-
sion of the stadium lease might have on government interests, and
to other such consequences.
1 In Cantor, it was noted that the claim of state violation of the
Sherman Act was first raised in Parker v. Brown after this Court
had held in Georgia v. Evans, 316 U.S, at 162, that the State of
Georgia was a ‘‘person’’ within the meaning of Section 7 of the
Sherman Act. 428 U.S. at 586-87, 591.
18
(1941), and of the Sherman Act’s specific provisions
applicable to commerce within the District, 15 U.S.C.
§ 3, App. D 77a-78a. Under the Constitution, Congress
exercises plenary power over the District of Columbia
and its officers. District of Columbia v. Carter, 409
U.S. 418, 429 (1973). When Congress enacted the Sher-
man Act in 1890, the governance of the District of
Columbia was a direct responsibility of the Congress
and the Federal government itself.
The Court of Appeals’ holding that the Sherman
Act applies to a Congressionally-created agency of
the District of Columbia government is thus tanta-
mount to a conclusion that Congress intended the
Sherman Act to cover not only private restraints of
trade in the District but any actions of the Congress
itself that might restrain trade in the District. But
the Court of Appeals, in so holding, gave no considera-
tion to any aspect of the Sherman Act’s terms, history,
or purposes as they might relate to the District. Pe-
titioners submit that if Congress intended to include
within the Sherman Act conduct taken in governing
the District of Columbia, ‘the ordinary dignities of
speech would have led’ to its mention by name.“
Cooper, 312 U.S. at 606.
U. THE COURT OF APPEALS’ DECISION CONFLICTS WITH
DECISIONS OF THE FIRST, SIXTH. AND NINTH CIRCUITS
The question of the applicability of the Sherman
Act to government contracts between non-Federal gov-
ernment agencies and private parties has been consid-
ered by six Courts of Appeals as well as by a number
of lower Federal courts. As already noted, the decision
of the court below is the only ruling, so far as petition-
ers are aware, by any Court of Appeals regarding the
19
applicability of the Sherman Act to a public contract
of a Congressionally-created agency.“
Major confusion has characterized the decisions of
the Courts of Appeals regarding public contracts and
the Sherman Act. This has resulted from widely dif-
fering interpretations of Parker v. Brown, 317 U.S.
341 (1943), from uncertainty as to the bearing of this
Court’s Goldfarb and Cantor decisions on the public
contracts question, and in some measure from confu-
sion as to the merits of the analysis of the Court of
Appeals below.
The conflict is square between the decision below
and the decision of the Court of Appeals for the First
Circuit in Z. N. Wiggins Airways, Inc. v. Massachu-
setts Port Authority, 362 F.2d 52 (1st Cir.), cert. de-
nied, 385 U.S. 947 (1966), the decision of the Court
of Appeals for the Sixth Circuit in Padgett v. Louis-
ville & Jefferson County Air Board, 492 F.2d 1258
(6th Cir. 1974), and the decision of the Ninth Circuit
in Sun Valley Disposal Co. v. Silver State Disposal
Co., 420 F.2d 341 (9th Cir. 1969). In addition, the
Ninth Circuit, in holding the Sherman Act inapplica-
ble to alleged anticompetitive conduct of the State of
New Mexico and several of its subdivisions, has noted
that the Court of Appeals below ‘‘did not limit its rea-
soning to cases involving Federal [governmental] ac-
Of. Consumers Union of U.S., Ine. v. Rogers, 352 F. Supp. 1319
(D. D. C. 1973), where the court expressed the view that the Sher-
man Act was applicable to a trade agreement between foreign steel
companies made as a result of negotiations initiated by the Secre-
tary of State at the direction of the President’’ (id. at 321) with
apparent assurances of Sherman Act immunity. However, the Sher-
man Act issue was then mooted. See Consumers Union of U.S., Ine.
v. Kissinger, 506 F.2d 136 (D.C. Cir. 1974), cert. denied, 421 U.S.
1004 (1975).
20
tion,’’ concluding that the Ninth Circuit’s view of gov-
ernmental immunity ‘‘is inconsistent with the rationale
of Hecht.“ State of New Mexico v. American Petro-
fina, Inc., 501 F. 2d 363, 371 (9th Cir. 1974).
On the other hand, the Courts of Appeals for the
Third, Fourth, and Seventh Circuits have applied the
Sherman Act to state or local governmental action in a
manner similar to the decision below. See Duke ck
Co., Inc. v. Foerster, 521 F.2d 1277 (3d Cir. 1975);
City of Fairfax v. Fairfax Hospital Association,.
F.2d ——, 1977-2 Trade Cas. 161,598 (4th Cir. 1977);
Kurek v. Pleasure Driveway & Park District, 557
F.2d 580 (7th Cir. 1977).
The nature of these conflicts and the importance
of the issue to which they relate can best be under-
stood by consideration of the following background:
The public contract is an increasingly important in-
strument of government at all levels—Federal, state
and local. Besides its obvious utility in procuring a
broad range of goods and services,” the government
contract is a vital tool of public policy. Through the
award of government contracts and enforcement of
their terms, for example, the Federal government acts
to alleviate unemployment in designated sections of the
country, to ensure equal employment opportunity and
fair labor practices, to protect the environment, to aid
small businesses, and to assist domestic industries in
competition with foreign concerns.
For example, in fiscal year 1977, the Department of Defense
alone entered into 217,566 procurement actions (awards of or
changes in prime contracts) of $10,000 or over. Military prime con-
tracts awarded after receipt of two or more responsive offers totaled
over $18,564,000,000. Office of the Secretary of Defense, Military
Prime Contract Awards, October 1976-September 1977 at Table 9,
Table 16 (1978, in press).
21
Many public contracts (and their underlying policy-
implementation purposes) would be jeopardized by
application of the antitrust laws in the manner urged
by the Court of Appeals. Governments often seek and
obtain price concessions that are unavailable to other
purchasers of goods or services.“ Governments some-
times enter into price-fixing agreements,” tying ar-
rangements,* and requirements contracts.“ Govern-
ment contracts, like that between petitioners, frequently
provide for grants of exclusive rights to private parties
in return for reciprocal benefits to the government.”
And governments often debar private parties from con-
tracting or otherwise dealing with government agen-
cies.”
The inapplicability of the Sherman Act to public
contracts—as held by the First, Sixth, and Ninth Cir-
cuits but rejected by the court below—is an aspect of
the general rule that the antitrust laws are not appli-
16 The Robinson-Patman Act has been ruled inapplicable to con-
tracts of the Federal government. Comp. Gen. B-178928 (July
17, 1973) ; 38 Op. Att’y Gen. 539 (1936).
17 See State of New Mexico v. American Petrofina, Inc., 501 F. 2d
363 (9th Cir. 1974); Ventura Port District v. Taxpayers, 53 Cal.
2d 227, 233-35, 347 P.2d 305, 310-11 (1959).
18 See City of Lafayette v. Louisiana Power & Light Co., No. 76-
864, Oct. Term, 1976.
1 Compare Kalvar Corporation, Inc. v. United States, 543 F.2d
1298 (Ct. Cl. 1976), with Tampa Electric Co. v. Nashville Coal Co.,
865 U.S. 320 (1961).
20 Friend v. Lee, 221 F.2d 96 (D.C. Cir. 1955); Panama City v.
Seven Seas Restaurant, Inc., 180 So. 2d 190 (Fla. App. 1965) ;
Hertz Drive-Ur-Self System, Inc. v. Tucson Airport Authority, 81
Ariz. 80, 299 P.2d 1071 (1956).
n Compare Gonzalez v. Freeman, 334 F.2d 570 (D.C. Cir. 1964),
with Silver v. New York Stock Exchange, 373 U.S. 341 (1963).
22
cable to valid government acts. Parker v. Brown, 317
U.S. 341 (1943).% See Eastern Railroad Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127,
135 (1961). In E. W. Wiggins Airways, Inc., for exam-
ple, the Port Authority had contracted with a private
company for the latter to become the sole maintenance
service operator at Logan Airport in Boston. An anti-
trust suit was brought by one of the former service
operators, naming the Port Authority and the new
eperator as defendants. In holding that no suit lay, the
First Circuit said:
By statute [the Authority] has been constituted
a public instrumentality and the exercise of the
powers conferred upon it is deemed and held to be
the performance of an essential governmental
function. It also has wide powers, many of which
are bestowed only upon instrumentalities of gov-
ernment.
7 * *
In carrying out its responsibilities the Au-
thority decided that it was necessary to have only
one fixed base operation at Logan and pursuant
to that decision, entered into the lease with [the
chosen fixed base operator]. It is clear that in
doing so it was acting as an instrumentality or
agency of the state, pursuant to the legislative
mandate imposed upon it to operate and manage
In Parker, this Court, in making the point that it was dealing
with sovereign governmental action, said that ‘‘the state...
made no contract or agreement and entered into no conspiracy in
restraint of trade or to establish a monopoly... .’’ 317 U.S. at
352. This language has not been taken, even by the court below
which quoted it, as an indication that every publie contract is
to be scrutinized to determine whether it imposes an illegal
restraint or otherwise violates the antitrust laws. At the very most,
Parker leaves open the question posed by this case, which should
now be answered.
23
the airport and establish rules and regulations for
its use .... What was done here was in the exer-
cise of a valid governmental function. The anti-
trust laws are aimed at private action, not at gov-
ernmental action.“ 362 F.2d at 55.
As for the defendants other than the Port Author-
ity, the court held that in the circumstances ‘‘it would
be an unreasonable restriction on [the Authority’s]
freedom to hold that the other defendants acted illegally
in having aided it.“ 362 F.2d at 56.“
To the same effect are Sun Valley Disposal Co. v.
Stlver State Disposal Co., 420 F.2d 341 (9th Cir. 1969),
and Padgett v. Louisville & Jefferson County Air
Board, 492 F.2d 1258 (6th Cir. 1974). See also Trans
The Court of Appeals below did not distinguish Wiggins on any
tenable ground. Indeed, the Court acknowledged that the Armory
Board could construct, maintain, and operate the RFK Stadium
as straight-forward federal governmental action’’ without being
subject to antitrust challenge. App. A 17a. But the Court stated
that Congress had not authorized the Board ‘‘to own and operate
the only professional football team to play in the Stadium. Id.
To be sure, it is not at all clear how the challenged lease trans-
formed the Board from operator of the Stadium to owner of the
Redskins. Beyond that, however, the Court seems simply to have
indulged in the outmoded distinction between ‘‘governmental’’ and
proprietary funetions— based upon what this Court has charac-
terized as ‘‘untenable criteria. . . .’’ New York v. United States,
326 U.S. 572, 583, 586, 591 (1946). There is very little today that
governmental bodies cannot directly do—construct housing develop-
ments, operate factories, lease warehouses, or provide public enter-
tainment. In any event, the Court’s attempted distinction is beside
the point. The Armory Board’s contract with the Redskins was
pursuant to its express statutory authority to operate the stadium.
It was a governmental act based upon the Board’s decision con-
cerning the use of the stadium, a decision that Congress made the
sole responsibility of the Board. The decision of the Massachusetts
Port Authority to contract for airport services in Wiggins was an
identical exercise of its power under its governing statute.
24
World Associates, Inc. v. City and County of Denver,
1974-2 Trade Cas. 175,293 (D. Colo. 1974); Conti-
nental Bus System, Inc. v. City of Dallas, 386 F. Supp.
359 (N.D. Tex. 1974) (private bus company was not
a defendant in the action).
The contrary view—and the need for clarification
of the applicable principles—is illustrated by the
Fourth Circuit’s decision in City of Fairfax v. Fairfax
Hospital Association, —— F.2d ——, 1977-2 Trade Cas.
161,598 (4th Cir. 1977). That suit involved an antitrust
challenge of a proposed lease between the Industrial
Development Authority of the County of Fairfax, Vir-
ginia (‘‘an agency of the Commonwealth of Virginia’’)
and a privately owned and operated community hos-
pital. Reversing the District Court’s judgment that the
proposed lease was not subject to the Sherman Act,
the Fourth Circuit—in two separate opinions and over
a dissent—concluded that the County’s Industrial De-
velopment Authority was not necessarily beyond the
scope of the Sherman Act. Jd. at p. 72,480. The diffi-
culty of applying Parker v. Brown, as elaborated by
Goldfarb and Cantor, to the many variants of public
contracting actions is evident in the opinions of both
Judge Wyzanski and Judge Widener, as well as in the
dissenting opinion of Judge Hall, who concluded that
the majority’s view of the state action“ exemption
was interpreted much too narrowly ....’’ Id. at p.
72,483.
The need for clarification is similarly reflected in
Murdock v. City of Jacksonville, 361 F. Supp. 1083
(M.D. Ala. 1973), which also involved a public agency’s
lease for the use of a public facility. In Murdock, the
court ruled that the municipality and its officials were
entitled to the full scope of immunity under Parker
25
because leases of city property (the coliseum) were
specifically authorized by the State legislature and the
exclusivity clause was inserted after a conscious de-
termination by the City Council that an exclusive lease
provided the greatest advantages to the City.“ 361
F. Supp. at 1093. But in reliance on the earlier deci-
sion of the Court of Appeals in the present case, the
Murdock court simultaneously held: ‘‘Clearly the im-
munity enjoyed by the City is not available to the pri-
vate corporate entity’’ that had leased the public fa-
cility. 361 F. Supp. at 1093. Compare Murdock with
Duke & Company, Inc. v. Foerster, 521 F.2d 1277 (3d
Cir. 1975), where the Sherman Act was held applicable
to governmental as well as private parties in a suit
involving concession arrangements at public facilities.”
Apart from the Court of Appeals’ holding that the
Sherman Act extends to government contracts, there is
no warrant for concluding that contracts of govern-
ment agencies ‘‘must be tested in accordance with the
United States antitrust laws as usually applied to con-
tracts between private parties. App. A 33a (emphasis
supplied).” The antitrust laws rest on the premise that
private commercial interests and the public interest do
not always coincide, thus necessitating public interest
In accord with the Third Circuit’s decision are Heath v. Aspen
Skiing Corp., 1971 Trade Cas. f 73,560 (D. Colo. 1971) ; Allegheny
Uniforms v. Howard Uniform Co., 384 F. Supp. 460, 463 (W. D.
Pa. 1974); and Kurek v. Pleasure Driveway & Park Distriet, 557
F. 2d 580, 589 (7th Cir. 1977).
** Nor can any significance be attached to the fact that the op-
posite party to a governmental agency contract is a private business
enterprise; an antitrust limitation imposed on the contract privi-
leges of a private party to a government contract is an equal limita-
5 on the government agency’s authority. Wiggins, 352 F.2d at
26
controls over private business activities and contrac-
tual relations. Antitrust law also adheres to the pre-
mise that competition, in the private sphere, is
paramount, Apex Hosiery Co. v. Leader, 310 U.S. 469,
500 (1940), even to the point where successful busi-
ness operations can no longer be conducted. Under
the antitrust laws, as usually applied to private par-
ties, many forms of business conduct are outlawed as
per se offenses without even an opportunity for inquiry
into their purposes, justification, or motivating inter-
ests. But these standards have been established en-
tirely on the basis of the courts’ extensive experience
with certain business relationships in the private sec-
tor. See White Motor Co. v. United States, 372 U.S.
253, 263 (1963). And these standards, as developed and
applied to private businesses, derive from the notion
that individual economic freedom in the free-enter-
prise system should not be foreclosed in any sector of
the economy by private citizens or groups.
United States v. Topco Associates, Inc., 405 U.S. 596,
610 (1972).
Governments, on the other hand, frequently enter the
. marketplace only when these premises have been found
inadequate and in need of modification. It is, moreover,
implicit in the authority given government agencies
dealing in the marketplace that their interests, objec-
tives, and motivations are distinct from those of private
parties. Such agencies, by their nature, are charged
with a responsibility for serving the public interest.
Thus, when a government agency exercises its statutory
discretion in carrying out its assigned responsibilities,
the premises of ordinary antitrust standards are
wholly lacking.
— — —
27
As a consequence, if the antitrust laws are to be
applied to government agency contract dealings, it will
be necessary to develop an independent set of antitrust
principles broadly at variance with those now applied
to transactions between private parties. If this is not
done, the Court of Appeals’ ruling that contracts be-
tween Congressionally-created government agencies
and private parties are equally subject to the antitrust
laws will improperly handicap many public agencies
both in fulfilling their assigned responsibilities and in
serving the public interest.
CONCLUSION
For the reasons stated herein, a writ of certiorari
should be granted to review the decisions of the Court
of Appeals.
Respectfully submitted,
Covineton & BURLING
Jam 8 C. McKay
Paul J. Tagliabue
Gregg H. Levy
888 Sixteenth Street, N. W.
Washington, D.C. 20006
(202) 452-6000
2 for Petitioner Pro-Football,
nc.
CoRPORATION COUNSEL, DISTRICT OF
CoLUMBIA
John R. Risher
Richard W. Barton
14th and E Streets, N.W.
Washington, D.C. 20004
Att for Petitioner District
of Columbia Armory Board
APPENDIX
14a
DA
UNITED STATES COUBT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 24,446
Norman F. Hor,
Harry Kacan,
Mazo A. Mruer, APPELLANTS
WasuHinoton Feperats INC., ET AL.
V.
Pno-FoorgalLL, INC., Er AL.
Appeal from the United States Distriet Court
for the District of Columbia
Decided April 27, 1971
0 0 °
Before Wrxey, Circuit Judge, Van Pext,* Senior United
States District Judge for the District of Nebraska, and
Gicnoux,** United States District Judge for the District
of Maine.
Wuxsy, Circuit Judge: Appellants brought this action
under §§1, 2, and 3 of the Sherman Act, alleging that a
restrictive covenant in the lease between appellee Pro-Foot-
ball, Inc., and appellee District of Columbia Armory Board,
which prohibits the use of Robert F. Kennedy Stadium by
any professional football team other than the Washington
Redskins for a period of thirty years, violates the pro-
hibition against contracts in restraint of trade.
* Sitting by designation pursuant to 28 U.S.C. § 294(d) (1964).
% Sitting by designation pursuant to 28 U.S.C. § 292 (e) (1964).
2a
Appellant-plaintiffs are three local businessmen, who over
a period of time sought to obtain either an American or
Continental Football League franchise for Washington, D.C.
The appellee-defendants are Pro-Football, Inc., the cor-
porate name of the Washington Redskins, the National
Football League, an unincorporated association of owners
of professional football teams of which appellee Pro-Foot-
ball, Inc., is a member, and the District of Columbia Ar-
mory Board, an unincorporated instrumentality of the
District of Columbia which operates Robert F. Kennedy
stadium.
Count 1 of appellants’ complaint alleges that the restric-
tive covenant in the Redskins’ lease on Kennedy Stadium
constitutes a contract in restraint of the business of pro-
fessional football in the District of Columbia, thus violat-
ing §§1 and 3 of the Sherman Act. Count 2 alleges that
the Redskins are engaged in an attempt to monopolize and
have monopolized the business of professional football in
violation of §§ 2 and 3. Count 3 joins the National Foot-
ball League and two individuals not parties to this appeal
with the Redskins in an alleged unlawful combination and
conspiracy to restrain and monopolize the business of pro-
fessional football in violation of §§ 1, 2, and 3 of the Sher-
man Act.
On cross-motions for summary judgment, the U.S. Dis-
trict Judge granted the appellee-defendants’ motions for
summary judgment on all three counts, reasoning:
Thus, the leasing of the stadium was pursuant to the
mandate of the Act and was governmental action. As
such it was... exempt from the antitrust laws.
No violation of the Act can be made out even where
there is a restraint upon trade or monopolization if it
resulted from valid governmental action. Eastern R.
Conf. v. Noerr Motors, 365 US. 127, 136 (1961).
In the manner the cross-motions for summary judgment
were submitted to the District Court, this was the only
3a
issue before it. The District Judge did not purport to de-
cide, and indicated that before doing so he would need to
hear evidence, whether the restrictive covenant in the lease
does constitute a contract in restraint of the business of
professional football, or whether this restrictive covenant
effectuates any monopoly of professional football by the
Redskins, or whether the restrictive covenant furthers the
conspiracy to restrain and monopolize the business of pro-
fessional football as alleged.
Nor do we decide these issues on this appeal. For rea-
sons set forth below, we conclude that the District Judge
erred in his holding recited above, and that the cause must
be remanded for trial upon the issues left undecided by the
— of appellee-defendants’ motion for summary judg-
ment.
I. The Statute and the Lease
The Robert F. Kennedy Stadium was constructed pur-
suant to an Act of Congress of 1957, with amendments in
1958 and 1959. By this statute the Armory Board was
authorized to construct, maintain and operate the stadium
“in order to provide the people of the District of Columbia
with a stadium suitable for holding athletic events and
other activities and events of a nature requiring such a
facility.“ The Secretary of the Interior was authorized
to acquire by gift, purchase, condemnation, or other-
wise, the property and to contract with the Armory
Board for the construction, maintenance and operation
of the stadium for a term not exceeding thirty years.“
Another section of the statute, strongly relied upon by the
appellees here, provided:
In order to carry out the purposes of this subchapter,
the Board is hereby authorized without regard to any
12 D.C, Code § 1720 et seg.
22 D.C. Code § 1720.
2 D.C. Code § 1721.
4a
other provision of law, but subject to any contract
entered into with the Secretary of the Interior under
section 2-1721 [for the use of the Stadium site]—
(1) to determine all questions concerning the use
of the stadiwm for the purposes of this subchapter;
(8) to rent or lease from time to time for any of
the purposes of this sub-chapter, all or any part or
parts of the stadium including any or all structures,
equipment or facilities of the stadium, at such rental
values and for such periods of time as the Board
shall determine (Emphasis supplied by appel-
lees in brief.)
Pursuant to this statute the stadium was constructed
and the lease between the Armory Board and the Redskins
entered into 24 December 1959 for a term of thirty years,
commencing with the football season in 1961. There is no
contention made here that there was any fraud, misrepre-
sentation, or overreaching on either side. There was arm s-
length, hard bargaining between the two parties for ap-
proximately a year and a half before the lease agreement
was signed. The restrictive covenant complained of reads:
[T]he Lessor shall have the right to lease or other-
wise permit the use and occupancy of the Stadium
during any period exclusive of such specific dates re-
ferred to herein for any purpose or purposes, (except
provided in subsection (a) of this Paragraph IX),
including (but not limited to) school, college or other
amateur or professional baseball, football and basket-
ball games and, also, for such other use or purpose as
the Lessor may determine, provided that at no time
during the term of this Lease Agreement shall the
Stadium be let or rented to any professional football
team other than the Washington Redskins. (Emphasis
supplied.)
— eC eo-
2 D.C. Code § 1728.
5a
It is alleged and not contradicted that Kennedy Stadium
is in fact the only suitable place for professional football
in the District of Columbia. It is undisputed that it has
many unique advantages. In 1965, appellants on behalf
of themselves and others with a financial interest in their
venture submitted an offer to the Armory Board to lease
Kennedy Stadium on those Sundays, Friday nights, and
Saturdays, and other times the stadium was not being
used by the Redskins, for a minimum guaranteed rent or
the same percentage of the gross receipts paid by the
Redskins. The Armory Board replied that under the
terms of the lease with the Redskins it was prohibited
from leasing the stadium to them or to anyone for the
use of another professional football team. After reitera-
tions of the offer, the Armory Board continued to adhere
to its position that the restrictive covenant of the lease
prohibited it from leasing Kennedy Stadium to another
football team without the consent of the Redskins.“ Thus,
appellants were not able to secure the use of the stadium
at any time during the year for professional football
purposes, and they allege that for this reason their efforts
to obtain franchises in the two professional football leagues
fell through.
The District Court emphasized in its opinion that the
legislative history of the Stadium Act shows that ‘‘there
would have been no stadium unless a long-term lease could
be negotiated by the Armory Board with the Redskins.”’
The District Court also placed great emphasis on the fact
that the Secretary of Interior’s contract with the Armory
Board for the construction, maintenance, and operation
of the stadium was for a term of not more than thirty
On 7 October 1965 the Special Assistant to the Solicitor of the
Department of Interior furnished the Solicitor’s legal opinion to
the Armory Board, concluding that the restrictive covenant in the
lease was in violation of the antitrust laws. On the basis of a
contrary opinion from a private law firm, however, the Board
adhered to its position that the lease’s restrictive clause was bind-
ing and enforceable.
6a
years, and that Congress authorized the Armory Board to
issue bonds for the construction of the stadium with the
principal payable not later than thirty years from the date
of issuance,
In the District Court’s opinion all of this added up to
governmental action which created an immunity from the
normal application of the antitrust laws. We can agree
that most of this was governmental action, that govern-
mental action was sensibly intermeshed and coordinated
over the same time span, and that there might have been
no stadium unless there could have been a long-term lease
with the Redskins professional football team (as well as
the Washington professional baseball team), but there is
no finding by the District Court that there would have
been no lease with the Redskins without the restrictive
covenant complained of and that Congress knew this, nor
is there any finding that Congress directly authorized such
a restrictive covenant.
II. The Applicability of the United States Antitrust Laws
to ‘‘Valid Governmental Action
The rationale of the trial court and the theory of the
appellees in sustaining its decision is set forth as the
execution of the. .. lease . . . constituted valid govern-
mental action which is immune from application of the
antitrust laws.“ In support of this appellees state, The
key, undisputed fact is that the Armory Board is a gov-
ernmental agency.’ And we are cautioned not to “‘over-
look the fact that, in leasing the Stadium, the Armory
Board acted pursuant to an Act of Congress.“ In con-
clusion, after review of the pertinent authorities, appellees
deduce the rule that where direct governmental action,
as distinet from private conduct, has caused the alleged
injury to a plaintiff, the provisions of the federal anti-
trust laws are inapplicable, . . .”? and ‘‘the action of the
Armory Board in entering into the Stadium lease with
the Redskins was a governmental act which is immune
from application of the antitrust laws.’’
7a
After a study of the rationale back of the decided cases
in this area of antitrust law, we consider that the issue,
the facts considered most relevant by appellees, and
the rule derived by appellees is a much too talismanic
approach where scrupulous distinctions are called for. As
was said earlier this year by Judge Goldberg in Woods
Exploration & Producing Co., Inc. v. Aluminum Co. of
America, ‘(t]he instant case involve[s] state participa-
tion. That proposition, however, only begins the analysis
for it is not every governmental act that points a path to
an antitrust shelter. We reject ‘the facile conclusion that
action by any public official automatically confers exemp-
tion.’ George R. Whitten, Jr., Inc. v. Paddock Pool Build-
ers, Inc.,...1 Cir. 1970, 424 F.2d 25, 30. Like Circuit
1971 Trade Cases f 73,422], Nos. 28,763, 29 i
Jan. 1971). Though Woods never referred to „e
v. Alabama Electric Cooperative, 394 F.2d 672 (5th Cir. 1968).
it is obvious that its rationale, based as it is on the proposition
that ‘ not every governmental act... points a path to an antitrust
shelter, represents a significant shift in the Fifth Circuit away
from the views of the majority in Alabama Power, which was based
upon the flat assertion that ‘‘it is settled that neither the Sherman
Act nor the Clayton Act was intended to authorize restraint of
governmental action,“ id., at 675, towards the rationale of Judge
Godbold’s dissent in that case. In language expressive of the
approach we take here, Judge Godbold stated:
Congress can, and in numerous instances b egisla-
tion has, subordinated the national — — 2 the
antitrust laws so as to authorize government officials to per-
form acts or pursue policies without regard to the antitrust
laws. N The courts carefully have limited these express]
conferred immunities to the scope defined in each instance vd
Congress so as to avoid pro tanto re ;
Id, at 680. peal of the antitrust laws.
And,
The cases do not support a propositi
; position of general -
ge immunity. If there is such a — — *
me" proceeding for a long time under a misapprehension in
p ang — * officers, and those with whom they
deal, ions ch are specific i arying i
scope. Id., at 685. — 43
8a
Judge Coffin in Paddock Pool, supra, ‘‘[w]e are particu-
larly reluctant to rely on verbal formulae to solve problems
of antitrust liability.“
Although the Sherman Act has been characterized as a
comprehensive charter of economic liberty aimed at pre-
serving free and unfettered competition as the rule of
trade, ' it is fundamental that neither the Sherman Act
nor any other antitrust statute restricts the United States
Government in directing action in complete contradiction
to antitrust policy, because after all the Sherman Act and
related antitrust statutes are only statutes, not consti-
tutional charters. But, the basic philosophy of our anti-
trust policy has been so long established, is of such
recognized economic importance, and has assumed in the
statutory scheme of things such high dignity * that a
contrary congressional intent or ‘‘immunity from anti-
trust laws ‘is not lightly implied.’ ’’ *
Anticipating a bit our conclusions below, we suggest
that it may be inaccurate and confusing to speak of valid
governmental action which is immune from application
of the antitrust laws.“ Rather, the proper inquiry would
seem to be to what extent Congress has knowingly adopted
a policy contrary to or inconsistent with the previously
established antitrust laws, or, where state action is
concerned (since states are not named in the Sherman
Act and antitrust laws are directed at suppression of
anticompetitive business action), the inquiry should be to
what extent is the state action permissible as not con-
7424 F.2d 25, 29 (1st Cir. 1970).
8 Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 4 (1958).
o See, e.g., United States v. Philadelphia National Bank, 374
U.S. 321, 348 (1963), stressing ‘‘the indispensable role of antitrust
policy in the maintenance of a free economy.
10 United States v. First City National Bank, 386 U.S. 361, 368
(1967), quoting California v. F.P.C., 369 U.S. 482, 485, (1962).
9a
travening the federal antitrust laws, which in our federal
system constitute overriding legislation under the federal
commerce power.
Putting the problem in this light, relevant criteria
would include the specific language of the congressional
statute involved, any legislative history which would throw
light on the congressional intent, the relative importance
of the governmental action which is asserted to override
antitrust policy, whether the governmental agency is
required to take into consideration the possible anti-
competitive effect of its actions, whether the agency is
required to adhere to a clearly defined and restricted
statutory directive, and to what extent the agency’s actions
are subject to judicial review.
We now turn to examine previous cases in which so-
called governmental action immunity has been an issue,
the answers given therein, and the principles which
emerge therefrom.
A. State regulation of business.
Although it might be more logical to consider first the
Federal Government’s regulation of business, yet the cases
relied upon most strongly by both parties involved state
action raising questions under the federal antitrust laws,
and since the Armory Board here is somewhat similar to
a state governmental agency, we turn first to the state
regulation cases.
The oldest called to our attention is Olsen v. Smith, u
in which Texas harbor pilots, licensed by the State of
Texas, sued to enjoin the activities of non-licensed pilots.
The defendants challenged the state licensing system as
being invalid under the federal antitrust laws, an argu-
ment which the Supreme Court rejected:
[I]f the State has the power to regulate, and in so
doing to appoint and commission, those who are to
1195 U.S. 332 (1904).
10a
perform pilotage services, it must follow that no
monopoly or combination in a legal sense can arise
from the fact that the duly authorized agents of the
State are alone allowed to perform the duties devolv-
ing upon them by law.”
Parker v. Brown” is apparently the decision which
opened the eyes of the antitrust bar to the possibilities of
avoiding the impact of the antitrust laws, if only state
governmental action is in some way involved. In Parker
the State of California, at the petition of some raisin
growers, established market and price controls over Cali-
fornia raisins, an action which necessarily had consider-
able impact on competition, since California produces most
of the raisins consumed in the United States. The Supreme
Court validated this marketing program, adopted pursuant
to the California Agricultural Prorate Act, holding that
the Sherman Act prohibits private action which has an
anticompetitive effect, but does not apply to state action.
The Court ‘‘found the California regulation consistent
with the national policy embodied in the Agricultural
Adjustment Act, which authorized the Secretary of Agri-
culture to impose similar marketing restrictions and which
recognized the simultaneous coexistence of state regulation
in its general instructions to the Secretary of Agriculture
to harmonize state and federal regulation.’’ *
Since the Court found the state regulation harmonious
with the federal agricultural regulatory scheme, the
Supreme Court could safely find that Congress had no
intent to have the already existing antitrust laws forbid
this type of state action, i. e., state agricultural regulation.
The Congress had already enacted a federal Agricultural
Adjustment Act which was inconsistent with the application
und., at 345.
18317 U.S. 341 (1943).
P. Aal, ANTITRUST ANALYsis 57 (1967).
lla
of the previously existing federal antitrust laws in this
area, the congressional agricultural statute was of equal
dignity with the antitrust statute, and the state agricul-
tural action was harmonious with the federal regulation;
hence, the Supreme Court did not apply the prohibitions
of the antitrust laws to this type state regulatory action.
In so doing, however, the Supreme Court did not give
much emphasis to a comparative evaluation of the other
important national policy, and used broad language which
was to provide the foundation for a much more expansive
governmental action immunity doctrine to be developed
by other courts in later cases:
We find nothing in the language of the Sherman Act
or in its history which suggests that its purpose was
to restrain a state or its officers or agents from activi-
ties directed by its legislature. ... [A]n unexpressed
purpose to nullify a state’s control over its officers and
agents is not lightly to be attributed to Congress.”
The Court aiso pointed out:
The state in adopting and enforcing the prorate
program made no contract or agreement and entered
into no conspiracy in restraint of trade or to estab-
lish monopoly, but, as sovereign, imposed the restraint
as an act of government which the Sherman Act did
not undertake to prohibit.**
Thus, Parker v. Brown involves not just state govern-
mental action; it involves regulatory action in the state’s
capacity as sovereign, and it involves sovereign state
regulatory action which is consistent with federal national
policy, i. e., the Agricultural Adjustment Act, enunciated
4° 317 U.S., at 350-51.
10 317 U.S., at 352.
12a
by the national Congress, which is also the source of
federal antitrust policy.”
* Years later the Fourth Circuit explained some of the limita-
tions inherent in Parker v. Brown:
The teaching of Parker v. Brown is that the antitrust laws
are directed against individual and not state action. When
a state has a public policy against free competition in an in-
dustry important to it, the state may regulate that industry
in order to contral or, in a proper case, to eliminate competi-
tion therein. It may even permit persons subject to such con-
trol to participate in the regulation, provided their activities
are adequately supervised by independent state officials... .
(Citing cases.) .... But such action must be state action,
not individual action masquerading as state action. A state
can neither authorize individuals to perform acts which
violate the antitrust laws nor declare that such action is law-
ful. Ashville Tobacco Board of Trade, Inc. v. F.T.C. (4th
Cir. 1959), 263 F.2d 502, 509. Cf. the most recent Fourth
Cireuit decision following Parker, Washington Gas Light Co.
v. Virginia Electric and Power Co., — F.2d —, 39 U.S.L.W.
2453-54, (4th Cir. 12 Feb. 1971).
See also the recent decision of the Fifth Circuit in Gas Light Co.
of Columbus v. Georgia Power Co., — F.2d —, — 39 L.W. 2545,
2546 (5th Cir., 23 March 1971), where in considering the anti-
trust implications of the adoption by the Georgia Public Service
Commission, regulating industry of undeniable importance to the
state, the court said:
Each of these acts and practices are (sic) rate schedules
and each has been considered by the Georgia Public Service
Commission in an adversary proceeding. Each is effective by
order of the commission. Defendant’s conduct cannot
be characterized as individual action when we consider the
state’s intimate involvement with the rate-making process.
Though the rates and practices originated with the regulated
utility, Georgia Power, the facts make it plain that they
emerged from the commission as the products of the com-
mission. They are thus immune from the operation of the
antitrust laws under the Parker exemption.
The result reached differs from that by the same Circuit in
Woods, but is justified by the fact that, although a state regula-
13a
The valid rationale of Parker v. Brown was recently
extensively analyzed by the Fifth Circuit in Woods
Exploration d Producing Co., Inc., et al. v. Aluminum
Company of America, et al.“ There two large-tract natural
gas operators allegedly conspired to file false forecasts
with the Railroad Commission of Texas, which regulates
the allowable amount of gas to be produced from each well
or unitized tract. These forecasts were used by the Rail-
road Commission to calculate the production allowable,
and thus had a direct influence on the nature of the state
regulatory action taken, particularly an adverse influence
on the amount of production allowed small-tract natural
gas operators, who filed the antitrust suit. The defendants
relied upon Parker v. Brown, supra, Eastern Railroad
Presidents Conference v. Noerr Motor Freight, Inc. and
United Mime Workers v. Pennington.” The Fifth Circuit
reversed the District Court’s grant of summary judgment
to the defendants, holding that the Woods case was similar
to Continental Ore Company v. Union Carbide and Carbon
Corporation, where the Supreme Court held that de-
fendants’ anticompetitive activities were not protected
tory agency is involved in each instance, in Woods the action of
the agency was alleged to be influenced by the illegal agreement
among the private parties to furnish false data, while no such
circumstance was alleged in Gas Light. However, the approach
of Judge Bell in Gas Light gave more weight to the sheer ex-
istence of state action than did the attempt to reconcile antitrust
and regulatory policies of Judge Goldberg in Woods or Judge
Godbold dissenting in Alabama Power, perhaps because such
comparative analysis was simply not called for on the facts of
Gas Light.
18 Supra, note 6.
1 365 U.S. 127 (1961).
2° 381 U.S. 657 (1965).
1 370 U.S. 690 (1962).
14a
under the Parker rationale. Judge Goldberg’s carefully
reasoned opinion also rejected the rationale ‘‘that because
of extensive regulation the oil and gas industry is not
susceptible to the strictures of the antitrust laws.“ Rather,
he considered that ‘‘state regulation does not mean that
there is no room for antitrust policies to operate
We therefore think it incumbent upon this court to render
both state regulatory and federal antitrust goals comple-
mentary rather than mutually exclusive.’’™
In Woods the Fifth Circuit took the approach of trying
to reconcile the overall antitrust policy with the highly
important state policy of regulating gas output. Where
state regulatory action is concerned, this is a logical
approach. But this reconciliation of state and federal
goals is but a part of the overall problem, is only one
example of several areas where the overall question is to
what extent, if any, the Congress intended to permit
action not consistent with the antitrust laws. In the case
at bar we do not put the matter as an effort to make state
and federal goals complementary rather than exclusive.
Since Congress enacted both the antitrust laws and the
22 The Woods opinion describes Continental Ore thusly:
There, a private firm acting as administrator of Canada’s war-
time rationing program used its discretionary power to exclude a
competing processor of vanadium ore from the Canadian market.
In defense of a private treble damage action, defendants asserted
that the purchasing agent was acting as an administrator of the
Canadian Government and that the conduct was therefore privi-
leged under Parker. The Supreme Court, stressing that there was
no evidence that the Canadian Government had approved of the
conduct of its agent, held that such conduct was subject to the
Sherman Act. Again, in UMW v. Pennington . . . the Court re-
iterated this rationale ana distinguished Continental Ore on the
ground that in that case there had been no indication that any
Canadian officia] ‘‘would have approved of joint efforts to monop-
olize the production and sale of vanadium... .’’
28 Supra, note 6, slip op. at 8.
15a
District of Columbia statute authorizing the construction
of the stadium, the proper inquiry is to what extent, if any,
Congress intended the action of the Armory Board not
to be subject to the previously existing national antitrust
policy. The appellees contend, and the trial court seemed
to go on this theory, that where there can be established
unequivocal state action the antitrust laws do not apply.
We might paraphrase Judge Goldberg, ‘‘But this state
[action] does not mean that there is no room for anti-
trust policies to operate.“
B. State-created sole intrumentalities.
In contrast with the technique of regulating a field of
business with resulting undeniable anticompetitive effects,
in some instances the state has either created or contracted
with a corporate entity, which became the state’s sole
instrumentality in carrying out what clearly would other-
wise be a governmental function.
In E. W. Wiggins Airways, Inc. v. Massachusetts Port
Authority ‘‘[t]he Authority decided that it was neces-
sary to have only one fixed base operation at Logan
[Airport] and pursuant to that decision, entered into the
lease with Butler-Boston. It is clear that in doing so it
was acting as an instrumentality or agency of the state
pursuant to the legislative mandate imposed upon it to
operate and manage the airport and establish rules and
regulations for its use.“ The action of the Authority in
entering into the exclusive lease with Butler-Boston for
the base operation at Logan Airport necessarily had an
anticompetitive effect upon all other private corporations,
including the plaintiff Wiggins Airways, who might have
been involved in, or who might have desired to enter into,
all or part of the activities constituting the operation of
the base at Logan Airport. Wiggins sued under §§1 and
0 Id.
* 362 F.2d 52, 55 (1st Cir. 1966).
l6a
2 of the Sherman Act, alleging the exclusive lease contract
was violative of these sections. Here obviously was a
situation in which the state itself might have performed
the very functions that it delegated to Butler-Boston as
its exclusive instrumentality; hence, the First Circuit
rejected the plaintiff’s contention that the state action was
violative of the federal antitrust laws.
A similar rationale lies behind the decision in Ladue
Locai Lines, Inc. v. The Bi-State Developmental Agency
of the Missouri- Illinois Metropolitan District.” There
Ladue, a private corporation engaged in bus transport in
the metropolitan St. Louis area, alleged violation of § 2
of the Sherman Act in the organization of Bi-State
through legislative action by Missouri and Illinois, and
the subsequent action of Bi-State in the transportation of
school children in the metropolitan area of St. Louis. The
Eighth Circuit held:
The fact that the effect of the compact gives Bi-State
a monopoly and that competitive interests of private
concerns are harmed does not violate the Sherman
Act. We deem it well settled that when a state an-
nounces a public policy against free competition in an
industry essential to it, state control and regulation
of that industry, even to the extent of eliminating
competition, is permissible.”
Here again the operation of a municipal bus line is some-
thing which the state or its creature, a municipality, might
do for itself. Since an area in two states was involved, the
legislatures of two states, with the approval of the United
States Congress, created a bi-state authority to perform
a strictly governmental function which, if performed by
government, would certainly constitute a monopoly. The
20 433 F. 2d 131 (8th Cir. 1970).
* Id., at 137.
17a
fact that the two states chose to create ‘a separate public
service non-profit corporation to serve as the sole instru-
mentality does not run afoul of the federal antitrust laws.
We suggest the obvious distinction of Wiggins Airwa
and Ladue Local Lines from the case at bar is that —
Congress empowered the Armory Board to construct,
maintain, and operate Kennedy Stadium, it was empower-
ing the Armory Board to do what another governmental
agency, such as the Interior Department, which does own
the land and the stadium itself, could have done as
straight-forward federal governmental action, i. e., operate
the stadium with full authority to rent to exhibitors of
football games. On the rationale of Ladue and Wiggins
such governmental agency action would not be subject to
antitrust challenge, nor is the Board’s management of the
stadium per se challen, d. But what Congress did not do
is create the Board as an instrumentality to own and
manage the only professional football team to be allowed
to play in the stadium ; hence, neither the Board nor the
Redskins in this case are performing a function that
a purely government agency itself could have performed.
On this basis we consider that the rationale justifying
holding the federal antitrust laws inapplicable to the state
action in Wiggins and Ladue is not a rationale which
supports the position of the appellees here.
C. Joint efforts to secure governmental action.
Two cases relied on by appellees here have been ci
n cited
— as —— as Parker v. Brown for the proposition
ere 8 action can be found th icati
— toe "4 e application of the
In an opinion heavy with overtones of First Amendment
rights, the Supreme Court in Eastern Railroad Presidents
Conference v. Noerr Motor Freight, Inc. legitimatized
% 365 U.S. 127 (1961).
18a
joint efforts by businessmen to influence legislative or
executive action, holding that even actions designed to
injure their competitors did not violate the Sherman Act.
A construction of the Sherman Act that would dis-
qualify people from taking a public position on matters
in which they are financially interested would thus
deprive the government of a valuable source of in-
formation and, at the same time, deprive the people
of their right to petition in the very instances in
which that right may be of the most importance to
them.”
In United Mine Workers v. Pennington ™ a small mining
company brought an antitrust action against larger min-
ing companies and labor unions, alicging a conspiracy in
violation of the Sherman Act, one of the objectives being
to cause the Secretary of Labor to set unreasonably high
wage rates and the ultimate objective being to put the small
company out of business. The Supreme Court followed
Noerr and held that joint efforts to influence public
officials do not violate the antitrust laws even though
intended to eliminate competition.’™
First Amendment rights following Noerr and Penning.
ton were given their most expansive treatment in United
0 Id., at 139.
90 381 U.S. 657 (1965).
Id., at 670. Without at this moment analyzing what the Con-
gressional Act authorizing Kennedy Stadium does contain in the
way of an antritrust exemption, we point out that if the Redskins
had lobbied with Congress for a specific provision in the Stadium
Act stating that in order to secure a long-term lease the stadium
would be leased for professional football exclusively to one team, the
activities of the Redskins in lobbying for such a provision would
have fallen squarely within Noerr and Pennington, and clearly
would have been valid as an exercise of First Amendment rights.
19a
States v. Johns Manville Corporation,” -where it was held
that activities engaged in to influence the decisions of
public procurement officials on product specifications so
narrowly as to eliminate the products of competitors, ‘‘are
constitutionally protected and cannot be the basis of a
finding of violation of the antitrust laws, . . regardless
of the intent with which they were undertaken.“ * The
Justice Department did not take an appeal from dismissal
of the Johns Manville complaint by the District Court, and
thus the rule of Noerr-Pennington was expanded to legiti-
matize combinations to influence the government’s actions
as a purchaser in the market, not only when acting in a
sovereign legislative or regulatory capacity.“ In the case
at bar the government agency, the Armory Board, is not
acting as a purchaser in the market, but rather as a seller
of facilities in which football games can be played. If
Johns Mamville were binding precedent, the appellees’
reliance on the Noerr-Pennington doctrine would be better
placed. But even at the time of the Johns Manville Dis-
trict Court decision there were perspicacious observers *
who predicted that the District Court opinion had given
unwarranted scope to the Noerr doctrine and that ulti-
mately application of the antitrust laws would prevail.
On the precise issue of Johns Manville the First Circuit
in George R. Whitten, Jr., Inc. v. Paddock Pool Builders,
Inc.“ reached precisely the opposite result. For purposes
of the appeal from the District Court summary judgment
dismissing the plaintiff’s treble damage antitrust com-
plaint, the Court of Appeals assumed that the defendant
259 F. Supp. 440 (E.D. Pa. 1966).
Id., at 453.
** See generally S. Oprennem & G. WzsTon, FEDERAL ANTI- :
Trust Laws 160-162 (3d ed. 1968).
* See ANTITRUST AND TRADE REGULATION Topay 87 (J. Scott
ed. 1969).
424 F.2d 25 (1970).
20a
Paddock had combined with architects and others to write
the specifications for pipeless swimming pools bought by
public agencies in a way that would exclude competitors.
The plaintiff Whitten was in the same business as Pad-
dock, and alleged damages by these acts of Paddock,
which were contended to be in violation of the antitrust
laws. Paddock defended on the valid governmental action
theory of Parker v. Brown and the rationale of Noerr-
Pennington that under the First Amendment its efforts to
influence public officials could not be in violation of the
anti-trust laws. In a carefully reasoned opinion Judge
Coffin and the First Circuit rejected both retionales. In
rejecting Parker v. Brown as binding precedent, the First
Circuit stressed, ‘‘Our reading of Parker convinces us that
valid government action confers antitrust immunity only
when government determines that competition is not the
summum bonum in a particular field and deliberately at-
tempts to provide an alternate form of public regula-
tion.“ In rejecting the Noerr analysis as applicable, the
Court of Appeals said, !
The key to this decision, . . is the Court’s heavy
emphasis on the political nature of the railroad’s ac-
tivities and its repeated reference to the ‘‘passage or
enforcement of laws.“ The entire thrust of Noerr is
aimed at insuring uninhibited access to government
policy-makers. ... By ‘‘enforcement of laws’’ we
understand some significant policy determination in
the application of a statute, not a technical decision
about the best kind of weld to use in a swimming pool
gutter.““
The First Circuit also rejected Pennington, saying:
The state legislatures, by enacting statutes requiring
public bidding, have decreed that government pur-
Id., at 30.
88 Id., at 32.
2la
chases will be made according to- strictly economic
criteria. Paddock is free to seek legislative change in
this basic policy, but until such change is secured,
Paddock’s dealings with officials who administer the
bid statutes should be subject to the same limitations
as its dealings with private consumers We
conclude, therefore, that the immunity for efforts to
influence public officials in the enforcement of laws
does not extend to efforts to sell products to public
officials acting under competitive bidding statutes.”
In Trucking Unlimited v. California Motor Transport
Co., the Ninth Circuit likewise declined to apply the Noerr-
Pennington exemption. There trucking firms had united to
oppose competitors’ requests for certification with the
Oalifornia Public Utilities Commission and the Interstate
Commerce Commission. The combine of trucking firms
threatened to use its cumulative financial and legal weight
to block any action by the regulatory Commission. The
Ninth Circuit said:
The fundamental reason for the Noerr-Pennington ex-
ception does not apply. It is not the function of the
courts to determine whether laws restraining trade
will be adopted or, having been adopted, whether they
will be enforced; nor is this the function of an ad-
ministrative agency engaged in adjudication, .... It
would be pointless to limit the reach of the Sherman
Act in order to protect the access of courts and agen-
cies engaged in adjudicative functions to information
and opinion relevant to determinations they have no
power to make.“
8° Id., at 33.
4° 432 F. 2d 755 (9th Cir. 1970).
Id., at 758-759.
=
The court in Trucking Unlimited apparently considered
that an adjudicative agency was in a position similar to a
governmental agency charged with procurement, as in
Paddock Pool. In neither case was the governmental
agency in a position to make governmental policy, it was
obligated to carry out the policy as already made, hence the
rationale of Noerr-Pennington, guaranteeing access of
private parties in combinations which would otherwise be
illegal under the antitrust laws to influence such agency
simply did not apply.
Trucking Unlimited illustrates again that the determina-
tion that a state agency and state action are involved ‘‘is
only the beginning of the inquiry.’’ In this category of
joint efforts to secure governmental action we are dis-
cussing belongs, of course, Woods Exploration and Produc-
ing Co., Inc. v. Aluminum Company of America, supra,
already analyzed in full.
D. Federal government regulation of business.
We have deferred an examination of decisions relating
to federal government regulation of business until last for
several reasons. Both parties in the case at bar relied
most heavily on the decisions involving state action. The
Supreme Court decisions in Parker, Noerr, and Penning-
tom contained over-broad language in regard to the effect
of state action on the applicability of the antitrust laws,
and, in our opinion, subsequent decisions in lower courts
have not always fully taken into account the rationale
behind those Supreme Court decisions. On the other hand,
the decisions on the applicability of the federal antitrust
laws where federal regulation of business is involved
have always proceeded on a different basis. As has been
observed,
Each of the regulated industries presents a unique
problem when its status under the antitrust laws
needs definition or clarification. The Supreme Court
23a
has taken the position Congress has the responsibility
of deciding the role of competition for each regulated
industry. Therefore, each case is decided on the basis
of the wording of the particular statute involved.
A detailed study of the legislative history and an as-
sessment of the ‘‘pervasiveness’’ of the ‘‘regulatory
scheme’’ set out in the particular statute are ear-
marks of each of the Court’s opinions on the function
of antitrust policy in regulated industries.“
While the leasing of public stadiums to professional
sports teams is not a regulated industry, it should not be
forgotten that that Stadium Act and the antitrust laws
were both enacted by the same legislative body, i.e., the
U.S. Congress. Therefore, there arises a similar problem
of determining congressional intent as to the applicability
or non-applicability of the antitrust laws, as we frequently
have in the case of a federal government regulated indus-
try. And, as mentioned above, some of the cases relied on
most heavily by both parties, e.g., Parker v. Brown, have
to do with state regulated industries. Therefore, it is
clear that the way the Supreme Court and other courts
have analyzed the applicability of the antitrust laws in
federal regulated industries is highly pertinent to the
analysis we make here of the Stadium Act, the applicability
of the antitrust laws to that Act, and the action of the
Armory Board taken thereunder.
In Silver v. New York Stock Exchange“ the Court con-
sidered ‘‘the proper approach to this case, in our view, is
an analysis which reconciles the operation of both
statutory schemes with one another rather than hold-
ing one completely ousted. The Securities Exchange
Act contains no express exemption from the antitrust laws
1 ANTITRUST AND TRADE REGULATION Topay 241 (J. Seott &
Rockefeller ed. 1967).
* 373 U.S. 341 (1963).
24a
or, for that matter, from any other statute.“ The Court
therefore held that the action here taken by the Exchange
would clearly be in violation of the Sherman Act unless
justified by reference to the purposes of the Securities
Exchange Act, and that such relevant purposes did not
require immunizing the Exchange from liability for treble
damages.
In United States v. Philadelphia National Bank“ the
Court likewise declined to find that the antitrust laws
(87 of the Clayton Act) did not apply, in spite of the
broad regulatory powers given the Comptroller of the Cur-
rency. This was followed by United States v. First Na-
tional Bank and Trust Co. of Lexington,’ in which the
Court again held that bank mergers approved by the
Comptroller are subject to antitrust laws and may be pro-
hibited by §1 of the Sherman Act. On the same day in
United States v. El Paso Natural Gas Co.“ the Court
similarly held that Federal Power Commission approval
of a utility merger does not render non-applicable the anti-
trust merger provisions of §7 of the Clayton Act.
However, in the Panagra case“ the Court found that
‘‘the Board is empowered to deal with numerous aspects of
what are normally thought of as antitrust problems,’’ that
the acts charged in this civil suit as antitrust viola-
tions are precise ingredients of the Board’s authority,
Id., at 357.
Id., at 364.
374 U.S. 321 (1963).
‘7376 U.S. 665 (1964).
*8 376 U.S. 651 (1964).
4% Pan American World Airways v. United States, 371 U.S. 296
(1963).
5° Id., at 305.
25a
and thus the complaint should have been dismissed." Like
other regulatory agency cases involving the applicability
of antitrust laws, the Panagra decision was posited
squarely on the particular statute under which the Civil
Aerorantics Board operates; hence, this contrai; result
is by no means inconsistent with the Supreme Conrt’s
decisions in the other cited cases. As another example, in
United States v. Radio Corporation of America™ the
Court held that the Federal Communications Commission
had no authority to decide antitrust issues. The Federal
Communications Act“ explicitly makes the antitrust laws
applicable to the broadcast industry.
The maritime industry operates under the power of the
Federal Maritime Commission specifically to grant exemp-
tions from the antitrust laws. This power is not to be
exercised loosely, hence in Federal Maritime Commission
v. Aktiebolaget Svenska Amerika Linien (Swedish Ameri-
cam Line)™ the Court upheld the Commission regulation
that shipping ‘‘conference restraints which interfere with
the policies of the antitrust laws will be approved only if
the conferences can show that they are required by a
serious transportation need, necessary to secure impor-
tant public benefits or in furtherance of a valid regulatory
purpose of the Shipping Act.“ ™
: From this review of recent regulatory agency cases
involving the applicability or non-applicability of the anti-
trust laws, it clearly emerges that Congress knows how to
The Court construed the antitrust exemption to be only as
broad as specified in the statute. We, therefore, refuse to hold
that there are no antitrust violations left to the Departm t
of Justice to enforce. (At 305). *
52 358 U.S. 334 (1959).
50 47 U.S.C. 151 et seg.
390 U.S. 238 (1968).
Id, at 243. (Emphasis supplied.)
26a
spell out an exemption from the antitrust law when it
— to do so, e. g., the CAB and the FMC, where the
agencies give consideration to antitrust policy * but make
the initial decisions themselves, and in contrast to pro-
ceedings in the Federal Communications Commission,
where any action by the FCC is specifically open to anti-
trust challenge. When the Congress was dealing with foot-
ball and other sports,“ it passed a special statute which
permits professional sports teams to negotiate for all
league members for television rights, and provides that
„It jhe antitrust laws. . . shall not apply to any [such]
joint agreement It also reaffirmed the usual
applicability of the antitrust laws to any other contract
‘‘by, between, or among persons engaging in, conducting,
86 Two recent decisions of our court should be noted, although
the issue of the non-applicability of the federal antitrust laws was
not directly raised. In Marine Space Enclosures, Inc. v. F. M. C.,
137 U.S. App. D.C. 9, 420 F.2d 577 (1969), FMC approval of a
contract between New York City and the New York Port Authority
containing restrictive covenants was challenged. This court re-
manded the case to the Commission for further proceedings fully
exploring the antitrust questions arising from the restraints in the
contracts. It may be implied from this ruling that even though
the antitrust laws do not invalidate contracts approved by the
Federal Maritime Commission, and this contract was between gov-
ernment entities, yet the responsible governmental body, i. e., the
FMC, was required to give due consideration to national antitrust
policy. In National Aviation Trades Association v. C. A. B., 136
U.S. App. D.C. 367, 420 F.2d 209 (1969), this court had before it
an airport management contract between Pan American Airways
and the New York Port Authority, somewhat similar to that in-
volved in Wiggins Airways, supra. The Federal Aviation Act
requires the CAB to weigh the antitrust considerations, and hence
this court reviewed the record supporting the Board’s findings
that the contract would not create a monopoly in violation of the
national antitrust policy.
* Telecasting of Professional Sports Contests Act, 15 U.S.C.
§ 1291 et seg.
38 16 U.S.C. § 1291 (1961), as amended, 15 U.S. C. § 1291 (1966).
27a
or participating in the organized professional team sports
of football.
III. The District of Columbia Stadium Act and the
Claimed Nomapplicability of the United States Anti-
trust Laws
The appellees make as part of their principal argument
a claim that the provisions of the District of Columbia
Stadium Act exempt the stadium lease from application
of the antitrust laws. In support of this they point to the
specific language of the Stadium Act and its legislative
history.
A. The Statute.
The D.C. Stadium Act does provide in part:
In order to carry out the purposes of this subchapter,
the Board is authorized without regard to any other
provision of law,...
(1) to determine all questions concerning the use
of the stadium...
(8) to rent or lease from time to time for any of
the purposes of this subchapter, all or any part or
parts of the stadium. . for such periods of time as
the Board shall determine .
It is on the language without regard to any other provi-
sion of law’’ that appellees primarily rest their case that
the U.S. antitrust laws do not apply to a lease of the
stadium for any purpose, including a lease requiring
exclusive use by one professional football team for thirty
years.
50 15 U.S.C. § 1294.
2 D.C. Code § 1728. (Emphasis supplied.)
28a
The appellees do recognize however, that the expression
„without regard to any other provision of law’’ does not
confer a limitless exemption. Deposition testimony con-
sidered by the trial court in ruling on the summary
judgment shows that responsible officials of the Armory
Board consider that operation of the stadium is subject
to all the police, fire, and health regulations in the Dis-
trict of Columbia. Administrative practice is in accord
with this interpretation. And counsel for the appellees
on oral argument said that of course the Armory Board
has no power to lease the stadium for an illegal purpose.
Congressional statutes, we are told, and we agree, should
not be interpreted so as to lead to absurd or obviously un-
intended irrational results.
But exemption from the criminal and public safety
statutes is not the only result which might be characterized
as irrational and therefore not intended. Certainly the
strong policies against behavior deemed by Congress
criminal or hazardous to public safety militate against
any conclusion that in passing subsequent legislation
Congress intended to authorize such conduct. Yet other
statutes further policies so basic to our social structure
that—in the absence of unequivocal exemption therefrom,
either by specific statutory language or by a purpose to
enforce other policies of equal or greater importance—it
would be irrational to imply that Congress intended to
authorize the conduct they prescribe. Preeminent among
these are the antitrust laws, designed to preserve free
enterprise by prohibiting restraints upon free competi-
tion.
Under the wording of §1728 the Board is authorized
without regard to any other provision of law to carry out
the purposes of the subchapter, which are defined in
§ 1720 as to provide . . a stadium suitable for holding
athletic events and other activities and events of a nature
requiring such a facility... . Of particular significance
29a
to our analysis is subparagraph (3) of. § 1723, which au-
thorizes the Board to acquire property and equipment
necessary to carry out these purposes ‘‘except that no
contract for more than $3,000.00 shall be entered into for
the purpose of this paragraph without competitive bid-
ding. (Emphasis supplied.)
This latter language indicates that Congress considered
that the exemptive expression relied upon by appellees
made it unnecessary for the Board to follow any specific
competitive bidding regulations in letting ordinary con-
tracts, and so, under this subparagraph, it was necessary
to provide for the use of competitive bidding in letting
larger contracts having a value in excess of $3,000.00.
More than Congress’ preoccupation with such regulations,
however, this language indicates to us Congress’ concern
to preserve the competitive spirit in larger contract offer-
ings, even at the expense of its declared goal of permitting
the Board to operate the stadium as a private venture.
Consistent with this, it is difficult to understand: first,
if Congress intended the phrase ‘‘without regard to any
other provision of law’’ to embrace the antitrust laws, why
it adopted an anti-free competition attitude in regard to
the largest and most important contracts—for long-term
rental—the Board was authorized to make, while carefully
preserving competition by requiring competitive bidding
on other contracts over $3,000.00; second, if Congress did
intend to exclude the applicability of the antitrust laws,
why it did not do so in language as clear and specific as
that used to define the applicability of the competitive bid-
ding statute.
There is simply no reference in the Stadium Act (or in
its legislative history) to the antitrust laws specifically.
We are not cited to any other federal statute with lan-
guage comparable to that of the Stadium Act which has
been construed to rule ont the applicability of the anti-
trust laws.
30a
B. The legislative history.
Looking at the legislative history of the Act, we find no
support for the argument that Congress intended to place
the activities of the Board under § 1723 beyond the pale of
the antitrust laws. In fact, the inferences we gather from
examining the legislative history point to the opposite con-
clusion.
A statement made by Senator Bible, the then Chairman
of the District of Columbia Committee, when he was re-
porting to the Senate on an amendment to subparagraph
(6) of § 1723, dealing with concessions in the proposed
stadium, is relevant:
The Committee felt that, inasmuch as the stadium
is to be in the nature of a private venture, it was
more desirable that the Board be vested with the
authority to make its own decisions as to the letting of
concessions, without making restrictions on the
Armory Board. (Emphasis supplied.) =
This bit of legislative history indicates the motivations
behind the drafting of the Stadium Act. Though in
reality run by the Government, the stadium was to be in
the nature of a private venture. It therefore follows that
the Committee must have intended the stadium’s operator,
the Armory Board, to be free from the aegis of those
regulations applying to government agencies which would
hamper functioning as a private business. These would
include competitive bidding and federal procurement
regulations, but would not include the antitrust laws, to
which private businesses are subject; hence, the strong
inference that the expression ‘‘without regard to any
other provision of law’? was meant by Congress to refer
only to regulations applying to government agencies.
61 103 Cone. Rec. 13567 (1957).
3la
In arguing for the conclusion that Congress did intend
the Board’s leasing activities to be exempt from the anti-
trust laws, the appellees stress that it was essential for
the construction of the stadium and its subsequent profit-
able operation (it has not been profiitable) that the Armory
Board enter into a long term lease with the Redskins foot-
ball team, and that Congress knew this. In fact, it is fair
to say on the congressional testimony that the stadium
would not have been built without a long-term lease from
both the Redskins professional football team and the
Washington professional baseball team.
This is not to say, however, that the leases could not
have been secured without the restrictive covenant giving
exclusive rights wit respect to any particular form of
use, and the appellees concede that there is nothing in the
legislative history which mentions the question of whether
the Redskins or any other tenant would be given such a
restrictive covenant. Whether the Redskins would have
signed a thirty-year lease without such a restrictive cove-
nant is entirely speculative, but it is fair to point out that
appellants’ argument that there is no place in the District
of Columbia suitable for professional football other than
Kennedy Stadium is uncontradicted, that the Redskins
might have been faced with the alternative of having no
access at all to Kennedy Stadium unless they did sign a
long-term lease, and that the possibility of bringing in
another professional football team of a competitive league
could not have been excluded.
C. Comparative importance of the policies behind the Sta-
dium Act and national antitrust policy.
We think it significant that in those cases where the
antitrust laws were held not to apply there was a na-
tional or state policy of importance approximately equal
to the antitrust laws involved. For example, in Parker v.
Brown the state action was regulation of an important
32a
agricultural product, and a state regulation completely
consistent with the federal Agricultural Adjustment Act.
In Noerr and Pennington the constitutional First Amend-
ment rights formed the underpinning of the decision that
the actions of the private parties there in soliciting gov-
ernmental action were not in violation of the antitrust
laws. Similarly, in the federal regulatory cases such as
Silver, Philadelphia Bank, and others discussed above,
there was a conscious or implied evaluation of the im-
portance of the national policy reflected in the creation of
the regulatory agency compared with that of the federal
antitrust laws. The agency’s responsibilities, the ‘‘per-
vasiveness of the regulatory scheme, the extent to which
the agency itself was called upon to pass upon antitrust
considerations, and the degree to which it had in fact done
so as reflected in the record,” were all considered. Since
the creation of the regulatory agency and the definition of
its responsibilities stemmed from the same source as the
antitrust laws, i. e., the U.S. Congress, an effort was made
to reconcile the possibly conflicting national policies. In
almost every case there is a reiteration of the theme that
repeal or immunity or exemption from the federal anti-
trust laws will not be lightly implied.
We suggest that the action of Congress in providing a
public stadium for the District of Columbia, while a gov-
ernmental act of considerable importance to this particular
community, hardly rises to the same dignity or furthers
as important policies as the action of Congress in regulat-
ing the securities exchanges, the national banks, oil and
gas pipelines, aviation or maritime routes, and that if in
the consideration of cases arising from those federal
regulatory agencies it is necessary for the Supreme Court
and other courts to examine the extent to which the anti-
en See, e. g., this court’s decisions in Marine Space Enclosures
Inc. v. F. MH. C., swpra, and National Aviation Trades Association
v. C.A.B., supra
33a
trust laws apply,“ it is reasonable to hold here tha
„ t we
must find a definite, clearly expressed, specific intent of
Congress to rule out the applicability of the antitrust
laws to the acts of the Armory Board be
ton tees ee ry fore such exemp-
On examination of the statute, the legislative his
the administrative practice, a . the —
Aet with other federal statutes referring or not referring
to antitrust applicability, and the relevant cited cases, we
do not find that the applicability of the federal antitrust
laws has been excluded. We therefore hold that the
validity of the thirty-year lease between the appellees
Armory Board and Pro-Football, Inc., must be tested in
accordance with the United States antitrust laws as
usually applied to contracts between private parties. For
trial on the merits in accordance with this opinion the
judgment of the District Court is reversed and the case
Remanded.
63
a dame ey tn cited cases, the rule generally is that the anti-
A — 2 unless there is a specific exemption, as in the
cases; and, even in those, there must be a showing
in the record that the regulato
the antitrust implications in its deln 0
a |
Judgment
TRIS cAUsE came on to be heard on the record on appeal
from the United States District Court for the District of
Columbia, and was argued by counsel.
Ox CONSIDERATION THEREOF It is ordered and adjudged by
this Court that the judgment of the District Court appealed
frora in this cause is hereby reversed, and this case is
hereby remanded to the District Court for a trial on the
merits, in accordance with the opinion of this Court filed
herein this date.
Per Curiam
For the Court:
NarRHAx J. Paulo
Nathan J. Paulson
Clerk
Dated: April 27, 1971.
Opinion by Circuit Judge Wilkey.
35a
APPENDIX BB .
UNITED STATES DISTBIOT COURT
FOR THE DISTRICT OF COLUMBIA
Civil Action No. 2815-66
Norman F. Heont, get AL., Plaintiffs,
v.
PRo-FoorgALL, Inc., ET AL., Defendants.
OPINION
This action, as asserted by the plaintiffs in their second
amended complaint, was brought against the defendants
under § 4 of the Clayton Act (15 U.S.C. § 15), to recover
treble damages and obtain injunctive relief because of al-
leged violations by the defendants of §§1, 2, and 3 of the
Sherman Act (15 U.S.C. §§1, 2 and 3). Only the first
three claims of plaintiffs’ second amended complaint
are pertinent to the matter before the Court. Those
claims are set forth separately in what plaintiffs have de-
nominated Counts 1, 2 and 3. The plaintiffs and some of
the defendants have filed cross motions for partial sum-
mary judgments.’
The defendants joining in a motion for partial summary
judgment are the National Football League, the District
of Columbia Armory Board and its individual members,
and Pro-Football, Inc., hereinafter referred to as ‘‘Red-
skins. 9932
1 Certain other defendants named in the second amended com-
plaint were either served and thereafter dismissed or have not
been served.
* Pro-Football, Inc. is a corporation which owns and operates in
the District of Columbia a professional football team as a member
of the National Football League. That team is known as the
Washington Redskins.
36a
Count 1 of the second amended complaint charges the
defendants with entering into a contract in restraint of
trade in violation of §§ 1 and 3 of the Sherman Act. Count
2 of the second amended complaint charges the defendant
Redskins as being engaged in an attempt to monopolize
the business of professional football in the District of
Columbia in violation of §§2 and 3 of the Sherman Act.
Count 3 of the second amended complaint charges the de-
fendants Redskins and the National Football League of
having been engaged and now being engaged in an unlawful
conspiracy to restrain and monopolize, and of engaging in
an attempt to monopolize, and of having monopolized, the
business of professional football in the District of Colum-
bia in violation of §§ 1, 2 and 3 of the Sherman Act.
Essentially the charges made by plaintiffs in Counts 1,
2 and 3 of the second amended complaint arise out of a
lease agreement made on December 24, 1959, between the
District of Columbia Armory r ha the — - —
particularly paragraph II (e) o agreement. By
— 7 Armory Board leased to the Redskins for
a period of 30 years, beginning with the football season of
1961 and terminating at the conclusion of the football sen-
son of 1990, the now named Robert F. Kennedy Stadium
for the purpose of exhibiting all Redskins home profes-
sional football games. The lease provided that at no time
during its term would the stadium be let or rented to any
professional football team other than the Redskins. Plain-
tiffs assert that that restrictive covenant constituted a con-
tract in unreasonable restraint of the business of profes-
sional football in the District of Columbia; that it granted
the Redskins a monopoly of the business of professional
football in the District of Columbia. And plaintiffs fur-
ther assert that the restrictive covenant resulted from an
unlawful combination and conspiracy being engaged in by
the Redskins and the National Football League to restrain
and monopolize professional football in the District of
Columbia.
37a
The undisputed facts disclose that the Redskins is a pro-
fessional football team and the only football team which
engages in the exhibiting of professional football games in
the District of Columbia. The National Football League
is an unincorporated association of professional football
teams located in several cities in the United States. The
Redskins is a member of the National Football League and
it plays football games with other teams which are mem-
bers of the National Football League. The schedules of
such games are made up by the National Football League
and certain services, such as game officials, are made avail-
able to the participating teams by the National Football
League. The Redskins have been engaged in exhibiting
professional football in the District of Columbia for a
period of more than 25 years.
Plaintiffs Hecht, Kagan and Miller describe themselves
as joint venturers who desire to participate in the owner-
ship of a professional football team that would play its
games in the District of Columbia. They assert that be-
cause of the restrictive covenant in the Redskins lease with
the Armory Board they were unable to organize an Ameri-
can Football League team and a Continental Football
League team in the District of Columbia. Plaintiff Wash-
ington Federals, Inc. is a corporation created for the
purpose of organizing and operating in the District of
Columbia a professional football team. Plaintiffs Hecht,
Kagan and Miller own all of the stock of the Washington
Federals, Inc. Plaintiff United States Football League,
Inc. is a non-profit corporation which Hecht, Kagan and
Miller helped to form. The Washington Federals, Inc.
is allegedly a member of the United States Football
League, Inc. Neither the Federals nor any other fran-
chise holder in that League has ever employed coaches and
players let alone fielded a team or played a game.
The American Football League, at the time plaintiffs,
Hecht, Kagan and Miller announced they were interested
in organizing a Washington team in that league, was a
38a
separate and competing league from and with the National
Football League. Since the institution of this action in
1966, the National Football League and American Football
League have merged. That merger and its effects are not
relevant to the claims asserted in the Counts 1, 2 and 3
of the second amended complaint.
The Continental Football League has been described by
Hecht as a minor football League.
Hecht, Kagan and Miller have never owned nor been
associated with an organization which owned and operated
a professional football team. Nor have they had any ex-
perience with professional football. Hecht is the manager
and assistant cashier of a branch bank; Kagan is part
owner and operator of a retail liquor store; Miller operates
a restaurant. At the time of oral argument counsel for
the plaintiffs conceded that, other than as promoters who
are attempting to organize a professional football team,
plaintiffs Hecht, Kagan and Miller had no business or
property that could in any way be injured by the alleged
violations of the antitrust laws.
Plaintiffs argue that the restrictive covenant in the Red-
skins’ lease is on its face a contract in restraint of trade
and commerce. Defendants respond by asserting that the
lease being a contract of the Armory Board, a governmental
agency, is not within the scope of the Federal antitrust laws.
In E. . Wiggins Airways, Inc. v. Massachusetts Port
Authority, et al., 362 F.2d 52 (1 Cir., 1966), cert. denied,
385 U.S. 947 (1966), plaintiff Wiggins sought to recover
treble damages and obtain equitable relief on its claim that
defendants Port Authority and two corporations had en-
tered into a conspiracy, combination or contract in restraint
of trade or commerce in that they attempted to establish a
sole and exclusive fixed base operation at Logan Airport
in Boston, Massachusetts, and that each of the defendants
attempted to monopolize and combined or conspired to
monopolize the fixed base operation business, all allegedly
39a
in violation of §§ 1 and 2 of the Sherman Act.“ The con-
tract with the Port Authority gave the defendant cor-
porations the exclusive right to the fixed base operation at
Logan Airport. For some years prior to that contract
Wiggins and another company conducted fixed base opera-
tions as competitors at Logan Airport. Both Wiggins and
the competing company, as a result of the Port Authority’s
contract with the defendant corporations, were no longer
permitted to do a fixed base operation business at Logan
Airport. The United States District Court for the Dis-
trict of Massachusetts entered a judgment dismissing the
action on the ground that the complaint did not state a
claim upon which relief could be granted. The Court of
Appeals, in affirming the District Court, stated, 362 F.2d
at 58:
In carrying out its responsibilities the Authority de-
cided that it was necessary to have only one fixed base
operation at Logan and pursuant to that decision, en-
tered into the lease with Butler-Boston. It is clear
that in doing so it was acting as an instrumentality or
agency of the state, pursuant to the legislative mandate
imposed upon it to operate and manage the airport
and establish rules and regulations for its use. Plain-
tiff’s contention that the Authority in operating Logan
Airport is engaged in a purely proprietary capacity
and is conducting a private business has no merit. Nor
does the arrangement with Butler-Boston violate the
Sherman Act. What was done here was in the exercise
of a valid governmental function. The antitrust laws
are aimed at private action, not at governmental ac-
tion.
The court having found that the Port Authority’s con-
duct was lawful further held that it would be ‘‘unreason-
% A fixed base operation is one that provides facilities, fuel,
equipment, supplies and services at an airport which are used by
aircraft, crews, passengers and in handling freight connected there-
with. It is vital to air transportation. 362 F.2d 53, n. 2.
40a
able restriction on its freedom to hold that the other de-
fendants acted illegally in having aided it“ in the per-
formance of a governmental function. 362 F. 2d 56.
In Sun V Disposal Co., Inc. v. Silver State Disposal
Co., et al., — F. ad (9 Cir., December 17, 1969), a
summary judgment for defendants was affirmed. There
plaintiff had operated a garbage pick up and disposal
service in Clark County, Nevada. In engaging in that busi-
ness it had been competing with one of the defendants until
the latter obtained an exclusive franchise from the Clark
County Commission, a governmental body. In holding that
the exclusive garbage collection and disposal service con-
tract was not illegal the Ninth Circuit cited E. W. Wiggins
Airways, Inc. v. Massachusetts Port Authority, swpra, as
holding that ‘‘valid municipal action is without the scope
of the federal antitrust laws.’’
The Wiggins and Sun Valley decisions are consistent
with the rulings of the Supreme Court and other courts
that valid governmental action is not subject to the Fed-
eral antitrust laws. Eastern R. Conf. v. Noerr Motors, 365
U.S. 127 (1961), Mine Workers v. Pennington, 381 U.S. 657
(1965), Parker v. Brown, 317 U.S. 341 (1943), Alabama
Power Co. v. Alabama Electric Cooperative, Inc., 394 F.2d
672 (5 Cir., 1968), rehearing denied, 397 F. 2d 809 (1968),
Woods Exploration d Producing Co., Inc. v. Aluminum
Company of America, 284 F. Supp. 582 (8.D. Texas, 1968).
The plaintiffs would distinguish Wiggins and Sun Valley
Disposal Co. by asserting that the agreements in those
cases were the result of governmental action while the
leasing of the stadium by the Armory Board to the Red-
skins was in the nature of a business or proprietary act on
the part of the Board. Plaintiffs cite District of Columbia
v. Green, 96 U.S.App.D.C. 20, 223 F.2d 312 (1955), as an
authority in support of their contention. But that case
had to do with the question of governmental immunity
from an action for negligence and not with the matter of
4la
immunity from the application of the antitrust laws. The
history of immunity or want of immunity in tort actions
with respect to municipal corporations is to say the least
inconsistent and imprecise. It deals with the difference be-
tween discretionary and ministerial acts by municipal cor-
porations as well as efforts to distinguish governmental
functions exercised solely for the public at large from
those for the private benefit of the municipality. Thus it
has been held that fire prevention, police and education are
governmental functions while activities related to munici-
pal railways, atrports, gas, water and light systems are
proprietary. But there has been no consistency in the de-
cisions of the courts. 54 Harv. L. Rev. 437, 442, 34 Yale
L.J. 129, 22 Va. L. Rev. 910, 914-917, Hesse v. Rath, et al.,
249 N.Y. 435, 164 N. E. 342 (1928), Scibilia v. City of Phila-
delphia, 279 Pa. 549, 124 A. 273 (1924), City of Cleveland
v. Ruple, 130 Ohio St. 465, 200 N.E. 507 (1936).
Nor does District of Columbia v. Green, supra, any
longer have its original vitality. Its ruling was undercut
in Elgin v. District of Columbia, 119 U.S.App.D.C. 116, 337
F. 2d 152 (1964). Moreover, in the recent case of Spencer
v. General Hospital of the District of Columbia, —— U.S.
App. D. C. „ F. 2d —— (November 10, 1969), the
Court of Appeals sitting en banc provided ‘‘a formal inter-
ment of the ‘governmental-proprietary’ test of immunity.“
In applying the one man one vote“ principle, the Su-
preme Court has considered the building and running of
hospitals and the establishing of a housing authority as
carrying out governmental functions. Avery v. Midland
County, 390 U.S. 474, 476-477 (1968).
In City of Cleveland v. Ruple, 130 Ohio St. 465, 200 N.E.
507, the Cleveland municipal stadium and the related city
owned structures, including public halls and a parking
garage, were held to have been constructed and leased for
public purposes. That such purposes attach to the stadi-
um here is evident from a review of the District of Colum-
bia Stadium Act.
42a
The Robert F. Kennedy Stadium was constructed pur-
suant to an Act of Congress originally enacted in 1957 and
subsequently amended in 1958 and again in 1959. § 2-1720
D. C. Code (1967). That statute expressly authorized the
Armory Board to construct, maintain and operate the
stadium ‘‘[{i]n order to provide the people of the District
of Columbia with a stadium suitable for holding athletic
events and other activities and events of a nature requir-
ing such a facility.“ In order to accomplish that purpose
the Secretary of the Interior was authorized to acquire
by gift, purchase, condemnation or otherwise“ certain de-
scribed property and to enter into a contract with the
Armory Board for the construction, maintenance and op-
eration of the stadium which contract was to be for a term
not exceeding thirty years. §2-1721 D.C. Code (1967).
The Armory Board, in order to carry out the purposes of
the Act, was authorized among other things to determine all
questions concerning the use of the stadium for the pur-
poses of the Act, to operate or contract for the operation
of concessions deemed appropriate for the purpose for
which the stadium might be rented or leased, to furnish
services to lessees as in the judgment of the Armory Board
were necessary or suitable for carrying out the purposes
of the Act, and to lease the stadium for any of the pur-
poses of the Act at such rental values and for such periods
of time as the Board should determine. It was pursuant
to the authority thus vested in the Board that the lease
complained of by the plaintiffs was entered into by the Red-
skins. § 2-1723 D.C. Code (1967).
That lease was executed on December 24, 1959, for a
term of thirty years, which term was to commence with the
football season of 1961, and to terminate at the conclusion
of the football season of 1990. As the legislative history of
the District of Columbia Stadium Act reveals, there would
have been no stadium unless a long-term lease could be
negotiated by the Armory Board with the Redskins. When
the legislation was under consideration by the committees
43a
of Congress the then Chairman of the Armory Board as-
serted that without a long-term Redskin lease the stadium
could not be constructed.
The fact that there is a thirty year lease with the Red-
skins is significant for two reasons. First, the Stadium
Act provides that the Secretary of the Interior’s contract
with the Armory Board for the construction, maintenance
and operation of the stadium was to be for a term of not
more than thirty years. Thus that contract and the Red-
skins’ lease are for approximately the same thirty years.
Second, Congress authorized the Armory Board to provide
for the payment of the construction, operation and main-
tenance of the stadium through the issuance of bonds with
the principal payable not later than thirty years from the
date of issuance.®
Thus, the Armory Board was not only authorized to pro-
vide the people of the District of Columbia with a suitable
stadium but it was obligated to provide for the payment of
the construction, operaticn and maintenance of the stadium
through a bond issue. The sinking fund for the payment
of * 2 bonds’ principal and interest is to be derived from
the receipts resulting from the exercise of the Board of its
statutory powers, including the leasing of the stadium.
Faced with the obligations imposed by the Act and aware
that a long-term lease with the Redskins was necessary if
those obligations were to be met and the purposes of the
Act accomplished, the Armory Board entered into the
complained of lease agreement. Thus, the leasing of the
* Transcript of Hearings on S. 3736 and H.K. 12162 before the
Subcommittee on the Judiciary of the House Committee on the
District of Columbia and the Subcommittee on Fiscal Affairs of
the Senate Committee on the District of Columbia, 85th Cong.,
2d Sess. (p. 88).
s In the event refunding bonds were issued they would mature
no later than thirty years from their issuance, or fifty years from
September 7, 1957, whichever occurred first.
stadium was pursuant to the mandate of the Act and was
governmental action. As such it was as much exempt from
the antitrust laws as was the exclusive agreement entered
into by the Massachusetts Port Authority in its exclusive
lease to the Butler-Boston Company and the exclusive fran-
chise contract between the Clark County Commission and
Clark Sanitation, Ino.
Since the Armory Board’s conduct was lawful the Red-
skins did not act illegally in entering into the lease. To
conclude otherwise would be an unreasonable restriction“
on the Board’s freedom. E. W. Wiggins Airways, Inc. v.
Massachusetts Port Authority, 362 F.2d 52, 56, cert. denied,
385 U.S. 947 (1966), Alabama Power Co. v. Alabama Elec-
tric Cooperative, Inc., 394 F.2d 672, 677, rehearing denied,
397 F. 2d 809 (1968). No violation of the Act can be made
out even where there is a restraint upon trade or monopo-
lization if it resulted from valid governmental action.
Eastern R. Conf. v. Noerr Motors, 365 U.S. 127, 136 (1961).
Notice has been taken of the other contentions of the
parties. Some are inappropriate for consideration on mo-
tions for summary judgment; others are without merit.
The motion of defendants Armory Board, Pro-Football,
Inc. (Redskins) and the National Football League for sum-
mary judgment on Counts 1, 2 and 3 of the second amended
complaint is granted.
The motions of plaintiffs on Counts 1, 2 and 3 of the
second amended complaint are denied.
Wu B. Joxns
Judge
April 16, 1970
* The National Football League contends it had nothing to do
with stadium lease. But assuming it had, it, like the Redskins,
would not have been acting illegally,
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 75-1819
NORMAN F. HECHT, HARRY KAGAN
and Marc A. MILLER, joint venturers, APPELLANTS
WASHINGTON FEDERALS, INC. a corporation, et al.
V.
PRO-FOOTBALL, INC., a corporation, et al.
Appeal from the United States District Court
for the District of Columbia
(D.C. Civil 2815-66)
—
Argued 20 December 1976
Decided 20 December 1977
William Joseph H. Smith for appellants.
Bernard I. Nordlinger with whom Robert B. Frank
was on the brief, for appellee, Pro-Football, Inc., also
argued for appellee, D.C. Armory Board.
Bills of costs must be filed within 14 days after entry of judgment. The
rr
46a
Louis P. Robbins, Principal Assistant Corporation
Counsel for District of Columbia, Richard W. Barton,
Assistant Corporation Counsel and Leo N. Gorman, As-
sistant Corporation Counsel at the time the brief was
filed, were on the brief for appellee, D.C. Armory Board.
C. Francis Murphy, Corporation Counsel at the time the
record was filed, also entered an appearance for appellee,
D.C. Armory Board.
Before: MCGOWAN, Circuit Judge; Harrison L.
WINTER,” Circuit Judge for the Fourth Cir-
cuit and WILKEY, Circuit Judge
Opinion for the Court filed by Circuit Judge WILKEY.
WILKEY, Circuit Judge: This is a private antitrust
action. Plaintiffs Hecht, Kagan, and Miller (hereafter
collectively “Hecht”) are a group of promoters who in
1965 sought unsuccessfully to obtain an American Foot-
ball League (AFL) franchise for Washington, D.C. De-
fendants are Pro-Football, Inc., operator of the Wash-
ington Redskins (the Redskins), and the District
of Columbia Armory Board, an unincorporated instru-
mentality of the District of Columbia which operates
and maintains Robert F. Kennedy (RFK) Stadium un-
der contract with the Interior Department.“ The Armory
Board leases RFK Stadium to the Redskins. Hecht at-
tacks a restrictive covenant in that lease.”
*Sitting by designation pursuant to Title 28, U.S.C.
§ 291 (a).
1 The land on which the stadium is located is owned by the
United States.
? The lease runs from 1961 to 1990. Paragraph II (e) there-
of provides that “at no time during the term of this Lease
Agreement shall the Stadium be let or rented to any profes-
sional football team other than the Washington Redskins.”
Plaintiffs’-Appellants’ Appendix (App.) 34-35.
47a
Hecht contends that RFK Stadium is the only stadium
in the Washington metropolitan area suitable for the
exhibition of professional football games; that the re-
strictive covenant prevented him from obtaining the use
of the stadium; and that his inability to obtain the use
of the stadium prevented him from submitting an ac-
ceptable franchise application to the AFL owners, and
thus from competing with the Redskins in the Wash-
ington professional football market. Hecht's complaint
alleges that the restrictive covenant constitutes a con-
tract in restraint of trade, in violation of Sherman
Act §§1 and 3; and that the Redskins, in obtain-
ing the covenant and refusing to waive it, have mon-
opolized professional football in Washington, D.C., in
violation of Sherman Act § 2.“ The case was tried to a
*Sherman Act §1, 15 U.S.C. §1 (Supp. V 1975) provides
in pertinent part:
Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or com-
merce among the several States, or with foreign nations,
is declared to be illegal
Sherman Act § 3, 15 U.S.C. 53 (Supp. V 1975) provides in
pertinent part:
Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or com-
merce in any Territory of the United States or of the
District of Columbia . . or between any such Territory or
Territories and any State or States or the District of
Columbia, or with foreign nations, or between the District
of Columbia and any State or States or foreign nations,
is declared illegal.
*Sherman Act § 2, 15 U.S.C. §2 (Supp. V 1975) provides
in pertinent part:
Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person
or persons, to monopolize any part of the trade or com-
merce among the several States, or with foreign nations,
shall be deemed guilty of a felony ....
48a
jury, which rendered a verdict for defendants. Hecht
appeals numerous instructions and evidentiary rulings.
We reverse and remand for a new trial.
I. Facts
Formed in 1959-60 with eight franchised teams, the
AFL by 1965 was seriously considering expansion. It
planned to grant two new franchises, one to a city with
an NLF franchise and one to a city with no professional
football team. The granting of any new franchise re-
quired the affirmative votes of six clubs.
In June 1965 Hecht and his associates organized an
original group of investors. This group had no football
experience and limited financial strength, but possessed
a general familiarity with business affairs. Hecht sent
a franchise application form to the AFL, and followed
it with a meeting in late June with AFL Commissioner
Foss. They discussed details of the application, the need
for Hecht to bolster his group’s financial position, and
the feasibility of gaining access to RFK Stadium in view
of the Redskins’ lease. In that connection, Hecht and
Foss discussed the advisability of soliciting the aid of the
Interior Department in obtaining the use of RFK
Stadium.
Shortly after this meeting, Hecht persuaded three ad-
ditional investors to join his promotional group. These
were men of considerable means. Hecht also met with
Stewart Udall, then Secretary of the Interior. Udall
The trial was held on remand from this Court. Hecht v.
Pro-Football, Inc. (Hecht I), 444 F.2d 981, 947 (D.C. Cir.
1971), cert. denied, 404 U.S. 1047 (1972). In Hecht I, the
district court granted summary judgment for the defendants
on the ground that the Board’s leasing of RFK Stadium was
governmental action immune from the antitrust laws. We
reversod and remanded for trial on the merits, concluding
ee W ee coe
mu
49a
apparently responded favorably to Hecht’s proposal, and
told Hecht that his staff would investigate the legality
of the restrictive covenant in the Redskins’ lease.
In July 1965 Hecht submitted a written offer to pur-
chase an AFL franchise, couching the application in a
form suggested by Commissioner Foss. During July and
August there were numerous interchanges between Hecht
and the AFL group, about which there was conflicting
evidence. These events need not be detailed. Hecht pre-
sented evidence which tended to show that his promo-
tional activities were serious and that at least some mem-
bers of the AFL expansion committee favored his ap-
plication; he presented one piece of evidence which sug-
gested that if he got the stadium he would get the
franchise. The Redskins presented evidence which tended
to show that the AFL owners never seriously considered
expansion to Washington and that Hecht’s application
never had a chance of being approved.
On 7 September 1965 Hecht submitted a written pro-
posal to the Armory Board for shared use of RFK
Stadium. The Board told Hecht that it could not ne-
gotiate a lease with him owing to the restrictive covenant
in the Redskins’ lease. The Board also said, however,
that it would gladly consider any arrangement accept-
able to the Redskins under which Hecht could use the
stadium (i.e., a waiver of the restrictive covenant) and
by which the Board’s financial condition would be im-
proved.“ There was conflicting evidence about the prac-
ticality of any plan for sharing the stadium between two
professional football teams.
On 4 October 1965 Hecht received a memorandum from
the Interior Department expressing its opinion that the
*The Armory Board operated RFK Stadium at a net loss
before depreciation in each year from 1966 to 1974. Tran-
script (Tr.) 721-24, App. 110-27.
50a
restrictive covenant in the Redskins’ lease violated the
antitrust laws. Hecht distributed copies of this memoran-
dum to the AFL owners and to the Armory Board. Months
of intermittent and frustrating meetings followed. The
Redskins presented evidence which tended to show that
they had reason to doubt the sufficiency of Hecht’s fi-
nancial resources and the integrity with which he pur-
sued the negotiations. During this period, Hecht was
whipsawed between the positions of the Redskins and the
AFL. The Redskins would not seriously negotiate for
Hecht’s use of the stadium unless Hecht had an AFL
franchise; the AFL would not seriously consider Hecht’s
application for a franchise unless he had the use of RFK
stadium. In his quandary, Hecht made representations
to both sides which were optimistic at best. In August
1966 the Redskins broke off negotiations. In October
1966 Hecht filed his original complaint in this action.
II. OVERALL ANALYSIS
At the outset, the Redskins contend that we need not
reach Hecht’s various assignments of error because the
trial conclusively demonstrated that Hecht lacks standing
to sue. Section 4 of the Clayton Act confers the right to
sue for treble damages on [al ny person who shall be
injured in his business or property by reason of anything
forbidden in the antitrust laws. This section es-
tablishes a two-fold standing requirement: the plaintiff
must show both an injury-in-fact to his “business or prop-
erty” and a causal connection between that injury and
the defendant’s allegedly illegal acts.“ The Redskins con-
tend that Hecht has shown neither.
First,.they argue that Hecht’s promotional group had
a shifting and impermanent structure; that no money had
15 U.S.C. § 15 (1970).
*See Berger & Bernstein, An Analytical Frame::vrk for
Antitrust Standing, 88 YALE L. J. 809, 810-13 (1977).
5la
been contributed or even committed by its members; that
Hecht had no prospect of ever receiving a franchise; that
Hecht failed to negotiate toward a franchise in a serious
and businesslike manner; and that Hecht consequently
lacked “business or property” for antitrust purposes. As
will be pointed out more fully below,“ however, the courts
have generally not insisted that a plaintiff actually be en-
gaged in a going business in order to have antitrust
standing; it is sufficient if he has manifested an intention
to enter the business and has demonstrated his pre-
paredness to do so.“ Our review of the record indicates
that the evidence presented a question of fact for the
jury on these issues. We cannot hold that Hecht lacked
“business or property” as a matter of law.
Second, the Redskins argue that Hecht’s inability to
submit an acceptable franchise application was due en-
tirely to his own bad faith in negotiating with them for
use of RFK Stadium, and that Hecht consequently failed
to show a causal connection between his injury and the
restrictive covenant in the Redskins’ lease. We find this
argument sanctimonious and somewhat sophistical. The
negotiations, plainly, were frustrating for all concerned.
The question, in any event, was peculiarly one for the
jury.“ We cannot hold, in defiance of plain evidence
* See pp. 21-22 infra.
10 See Martin v. Phillips Petrol. Co., 365 F.2d 629, 633-34
(5th Cir.), cert. denied, 385 U.S. 991 (1966).
u Indeed, the jury could have found that bad faith might
more properly be attributed to the Redskins. Their protesta-
tions that they would have been only too happy to negotiate
seriously with Hecht once he had a franchise ring hollow, for
they knew full well that Hecht could not get a franchise until
he had access to the stadium. There was certainly no willing-
ness to negotiate any arrangement conditioned on Hecht’s
getting the AFL franchise; this might well have been all
Hecht needed to obtain it. If the Redskins were as sure as they
52a
and common sense, that the restrictive covenant was
causally unrelated to the injury of which Hecht com-
plains; the degree of causality may Ye another matter.
Having disposed of the Redskins’ threshold contentions,
we consider plaintiffs’ various assignments of error.
III. INSTRUCTIONS
A. Relevant Geographic Market.
In suits brought under the Sherman Act the threatened
foreclosure of competition must be assessed “in relation
to the market affected.“ » The relevant product market
in this case is indisputably the business of professional
football. The parties disagree, however, as to the rele-
vant geographic market. Hecht contends that it is the
metropolitan area of Washington, D.C.; the Redskins
contend that it is the entire United States. The trial
judge effectively instructed the jury that the relcvant
geographie market was the nation as a whole.“ We hold
that his instruction was clearly erroneous as a matter
| of law.
now assert they were that Hecht and associates could never
have obtained a franchise because of lack of financial re-
sources and other reasons, the Redskins could have avoided
this lawsuit by waiving their restrictive covenant and then
watching the AFL turn down the Hecht application.
18 Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 321, 827
(1961).
Although the trial judge purported to leave the question
of relevant geographical area to the jury, Tr. 2833, he defined
that area as the area of competition for football franchises.
See p. 10 infra. Since the trial established beyond perad-
venture that numerous cities were competing for franchises,
the judge’s instruction virtually directed the jury to find a
national market. Not surprisingly, the jury seems to have
ee Se instructions. See Tr.
1-53.
53a
The relevant geographic market is “the area of effec-
tive competition,” the area “in which the seller operates,
and to which the purchaser can practicably turn for sup-
plies.” ** It is well settled that the relevant market “need
not be nationwide,” and that “where the relevant com-
petitive market covers only a small area the Sherman Act
may be invoked to prevent unreasonable restraints within
that area.“ Indeed, courts have regularly identified
relevant geographic markets as single cities or towns,
and even portions thereof.“
In this case Hecht sought to enter the market for
professional football in Washington, D.C. He argues that
the Redskins frustrated his entry by denying him use of
RFK stadium, access to which was a condition precedent
to his submitting a successful franchise application. Given
this posture of the case, it seems evident that the rele-
vant geographical market is the D.C. metropolitan area:
it is here that “the seller operates;” it is here alone that
war Elec. Co. v. Nashville Coal Co., 365 U.S. 821, 328
Id., at 827, quoted in United States v. Philadelphia Nat’l
Bank, 874 U.S. 821, 359 (1968).
am Oil Co. v. United States, 337 U.S. 298, 299 n.5
aan States v. Columbia Steel Co., 384 U.S. 495, 519
“Eg e Co. v. United States, 345 U.S.
594 (1968) (relevant market is city of New Orleans); Lorain
Journal Co. v. United States, 842 U.S. 143 (1951) (relevant
market is city of Lorain, Ohio); Kansas City Star Co. v.
United States, 240 F.2d 648 (8th Cir. 1957) (relevant market
is Kansas City, Mo.); Gamco, Inc. v. Providence Fruit &
Produce Bld., Inc., 194 F.2d 484 (1st Cir.), cert. denied,
844 U.S. 817 (1952) (relevant market is Providence, R.I.);
William Goldman Theatres, Inc. v. Loew’s, Inc., 150 F.2d 738
(8d Cir. 1945), cert. denied, 884 U.S. 811 (1948) (relevant
market is downtown theatre district).
54
the Redskins’ customers (primarily, their ticket pur-
chasers) can “practicably turn” for the supply of pro-
fessional football. Hecht sought to compete for these cus-
tomers by obtaining a franchise of his own, and it can
scarcely be doubted that “the area of effective competi-
tion” between him and the Redskins would be the nation’s
capital.
The trial court, however, defined the relevant geo
graphical market as “the area of effective competition
for the acquisition, location and operation of a profes-
sional football franchise in the years 1965 and 1966.
It is true, of course, that Hecht had to “compete” with
other cities before he could assure himself of a franchise
for Washington; yet this is hardly the competition that
is at issue here. Hecht is not complaining that the Red-
skins’ restrictive covenant prevented him from entering
‘the national market for football franchises; obviously,
Hecht could have entered that market, notwithstanding
the Redskins’ lease, from any other city. Hecht is com-
plaining, rather, that the restrictive covenant on RKF
Stadium in Washington, D.C., prevented him from enter-
ing the market for professional football in Washington ‘i
this is “the area which the alleged restraints affect.
1 Tr. 2883, 2868.
“as least
considering expansion to u host of desirable sites, ‘te coat
as broad as the United States, including Hawaii and portions
55a
The “national competition” was but a preliminary, if
necessary, step to a distinctly local end. We hold, there-
fore, that the trial judge erred in failing to instruct the
jury that the relevant geographic market is the area of
metropolitan Washington, D.C., in which Hecht and the
Redskins would have effectively competed for customers.“
B. Monopolistic Intent and “Natural Monopoly.”
The offense of “monopolization” under Sherman Act
§ 2 implicates both the possession of monopoly power—
“monopoly in the concrete” — and an element of willful-
un These customers would include potential season ticket
holders and occasional ticket buyers, and, to a lesser extent,
purchasers of local radio and pre-season television broad-
casting rights. Most of a professional football team’s broad-
casting revenue, of course, derives from the national television
contract, which is negotiated by the league. As testimony at
trial indicated, however, individual teams have very little
control over the revenue they derive from this contract, and
thus the most important factor in considering location of a
franchise is the potential “gate” in the home city. Tr. (4 Apr.
1975) at 31. For this reason, national television audiences and
national television contract revenues should be ignored in
ascertaining the relevant market here. Cf. United States v.
Philadelphia Nat’l Bank, 874 U.S. 321, 361 (1968) (holding
relevant market to be metropolitan area of Philadelphia, Pa.):
[In ascertaining the relevant geographic market,] a
workable compromise must be found: some fair inter-
mediate delineation which avoids the indefensibie ex-
tremes of drawing the market either so expansively as
to make the effect of the merger upon competition seem
insignificant, because only the very largest . . customers
are taken into account in defining the market, or so nar-
rowly as to place appellees in different markets, because
only the smaliest customers arc considered.
See generally P. AREEDA, ANTITRUST ANALYSIS { 231 (2d ed.
1974).
* Standard Oil Co. v. United States, 221 U.S. 1, 62 (1911).
56a
ness or intent.“ To demonstrate intent to —
however, a plaintiff need not always prove that the
fendant acquired or maintained his monopoly power by
means of exclusionary, unfair, or predatory acts. At least
since Alcoa,“ it has been clear that the requisite intent
can be inferred if a defendant maintains his power by
conscious and willful business policies, however legal,
that inevitably result in the exclusion or limitation of
actual or potential competition.* In accordance with
Alcoa, Hecht requested an instruction that the jury could
find monopolistic intent if it found that the Redskins
had consciously engaged in acts or contracts, whether
lawful or unlawful, that “maintained and protected =
monopoly over professional football in Washington. —
trial judge refused to give this instruction. Instead,
ruled that the Alcoa theory of intent (viz., an inference of
monopolistic intent without a showing of specific —
practices) was not available to Hecht unless he pro
that the Washington metropolitan area could support two
professional football teams. We hold that this instruc-
tion was error.
In order to explain the trial judge’s chain of reason-
ing, it is necessary to elaborate somewhat the teaching
of Alcoa. In that opinion, Judge Hand recognized, as
United States v. Grinnell Corp., 384 U.S. 563, 570-71
(1966); United States v. Griffith, 334 U.S. 100, 107 (1948);
Yoder Bros., Inc. v. California-Florida Plant Corp., 587 F. 2d
1347, 1866 (5th Cir. 1976), cert. denied, 429 U.S. 1094 (1977).
United States v. Aluminum Co. of America, 148 F. 2d 416
(2d Cir. 1945) (Learned Hand, J.).
Id. at 428-31. See, e.g., United States v. Griffith, 834 U.S.
100, 105-08 (1948); Helix Milling Co. v. Terminal Flour Mills
Co., 523 F.2d 1317, 1821 (9th Cir. 1975), cert. denied, 423
U.S. 1058 (1976); United States v. United Shoe Mach. Corp.,
110 F.Supp. 295, 344-45 (D. Mass. 1953), aff'd per curiam,
847 U.S. 521 (1954).
57a
noted above, that monopolistic intent may be inferred
from conscious business practices that inevitably produce
or maintain monopoly power. Judge Hand also recog-
nized, of course, that there are situations in which an
inference of monopolistic intent absent a showing of spe-
cific unfair practices would be improper. One such situa-
tion is where defendant has a natural monopoly
where, in Judge Hand’s words, [a]! market [is] so
limited that it is impossible to produce at all and meet
the cost of production except by a plant large enough
to supply the whole demand.” In the wake of Alcoa,
accordingly, a substantial body of case law has developed,
holding that the “characteristics of a natural monopoly
make it inappropriate to apply the usual rule that success
in driving competitors from the market is evidence of il-
legal monopolization.” These cases hold, in short, that
a natural monopolist does not violate § 2 unless he “ac-
quired or maintained [his] power through the use of
means which are ‘exclusionary, unfair or predatory.’ “
* United States v. Aluminum Co. of America, 148 F. ad at
430. See C. KAYSEN & D. TURNER, ANTITRUST PoLicy 191
(1959):
Natural monopoly. In the economic sense, natural mo-
nopoly is monopoly resulting from economies of scale, a
relationship between the size of the market and the size
of the most efficient firm such that one firm of efficient
size can produce all or more than the market can take at
a remunerative price, and can continually expand its ca-
pacity at less cost than that of a new firm entering the
business.
„ Greenville Pub. Co., Inc. v. Daily Reflector, Inc., 496 F.2d
391, 397 (4th Cir. 1974).
* Ovitron Corp. v. General Motors Corp., 295 F.Supp. 373,
878 (S.D.N.Y. 1969), quoting American Football League v.
National Football League, 323 F.2d 124, 181 (4th Cir. 1963).
See, e. g., John Wright & Assoc., Inc. v. Ullrich, 328 F.2d 474,
479 (8th Cir. 1964); Union Leader Corp. v. Newspapers of
58a
In this case, therefore, the trial judge properly told the
jury that if it found the Redskins to have a natural
monopoly, “such a monopoly does not violate the anti-
trust laws unless it was acquired or maintained by ex-
clusionary, unfair, or predatory means.“
The trial judge further instructed the jury, however,
that Hecht bore the burden of proving that the Redskins
did not have a natural monopoly:”
In this connection, you are instructed that an
established operating professional football team may
be said to have a natural monopoly in a particular
city, if that city cannot support two essionai
teams under existing wana 1 Hy,
the plaintiffs must prove by a p
—— that (the D.C. metropolitan area,] in 1965
and 1966, could have reasonably supported both the
defendant Redskins and an [AFL] team.
This of the instruction, we think, was incorrect. It
tne cues Guat of Aine Ga, Gis 0 te eo
proven the defendant’s maintenance of its monopoly
power through conscious business practices, a rebuttable
presumption is estabiiched that defendant has the requi-
site intent to monopolize. The de
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