Appendix — Clarett v. National Football League

Supreme Court brief2005

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| Supreme Court, U.S.

S FILED

04-9] O DEC 3 0 2004

No. OFFICE OF THE CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

Maurice Clarett,

Petitioner,

National Football League,

Respondent.

On Petition For Writ Of Certiorari

To The Second Circuit Court Of Appeals

APPENDIX TO THE PETITION ang

ROBERT SKIRNICK ALAN C. MILSTEIN

DANIEL B. ALLANOFF (COUNSEL OF RECORD)

MEREDITH COHEN JEFFREY P. RESNICK

GREENFOGEL & SKIRNICK MICHAEL DUBE

ONE LIBERTY PLAZA SHERMAN, SILVERSTEIN,

35TH FLOOR KOHL, ROSE & PODOLSKY, P.A.

NEW YorRK, NY 10006 4300 HADDONFIELD ROAD

SUITE 311

ROBERT A. MCCORMICK PENNSAUKEN, NJ 08109

MICHIGAN STATE UNIVERSITY 856-662-0700

COLLEGE OF LAW

435 LAW COLLEGE BUILDING Counsel For Petitioner

EAST LANSING, MICHIGAN 48824

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

MAURICE CLARETT, OPINION AND ORDER

Plaintiff, a (SAS)

- against - 7

NATIONAL FOOTBALL

LEAGUE,

Defendant.

SHIRA A. SCHEINDLIN, U.S.D.J.:

I. INTRODUCTION

Maurice Clarett’s goal is to play in the National

Football League next year. The only thing preventing him from

achieving that goal is the League’s rule limiting eligibility to

players three seasons removed from their high school

graduation. The question before the Court is whether this Rule

violates the antitrust laws.

Clarett, a star freshman football player attending The

Ohio State University, now in his sophomore year, challenges

the Rule, claiming that he is ready, willing and able to play in

the NFL and that his exclusion violates the antitrust laws.

Clarett’s challenge to the Rule raises serious questions arising

at the intersection of labor law and antitrust law, not to mention

the intersection of college football and professional football.

Should Clarett’s right to compete for a job in the NFL — the

only serious pro football game in town — trump the NFL’s right

to categorically exclude a class of players that the League has

]

decided is not yet ready to play?

The answer requires the Court to tackle a number of

technical legal issues. The NFL defends itself by asserting

three arguments: (1) the Rule is the result of a collective

bargaining agreement between the NFL and the players union

and is therefore immune from antitrust scrutiny; (2) Clarett has

no standing under the antitrust laws to bring this suit; and (3)

the Rule is reasonable.

While, ordinarily, the best offense is a good defense,

none of these defenses hold the line. Because the Rule does not

concern a mandatory subject of collective bargaining (wages,

hours and conditions of employment), governs only non-

employees, and did not clearly result from arm’s length

negotiations, it is not immune from antitrust scrutiny. Clarett

has standing to sue because his injury flows from a policy that

excludes all players in his position from selling their services to

the only viable buyer — the NFL. Finally, the NFL has not

justified Clarett’s exclusion by demonstrating that the Rule

enhances competition. Indeed, Clarett has alleged the very type

of injury — a complete bar to entry into the market for his

services — that the antitrust laws are designed to prevent. It is

axiomatic, in the words of Learned Hand, that the antitrust laws

will not tolerate a contract “which unreasonably forbids any

one to practice his calling.”

Because the NFL cannot prevail on any of these

defenses, the Rule must be sacked.

Il. UNDISPUTED FACTS AND PROCEDURAL

POSTURE

The facts of this dispute are easily recounted and

' Gardella v. Chandler, 172 F.2d 402, 408 (2d Cir. 1949).

essentially undisputed, unless otherwise noted. Clarett, a

college football player, is suing the NFL under the Sherman

Antitrust Act,’ asserting that the League’s Rule limiting

eligibility for the draft to players three seasons removed from

their high school graduation constitutes an unreasonable

restraint of trade.

A. The NFL and the Collective Bargaining

Agreement

' The NFL began operating in 1920 as the American

Professional Football Association, comprised of twenty-three

member clubs.’ The current NFL is an unincorporated

association of thirty-two member clubs.* Although there are

other professional football leagues in North America —

including the Arena Football League, the Arena Football

League 2, the National Indoor Football League, and the

Canadian Football League’ — the NFL. dominates. It

consistently outperforms all other professional sports leagues,

not to mention the other professional football leagues, in both

revenues and television ratings.° The Super Bowl — the

2 15 U.S.C. § 1 et seq.

3 See American Football History, at http://

wiwi.essortment.com/americanfootbal_rwff.htm

4 See 11/20/03 Second Declaration of Peter Ruocco (“Ruocco

Decl.”) ¥ 2. Peter Ruocco is the Senior Vice-President of Labor

Relations of the NFL Management Council and was personally

involved in the 1993 collective bargaining. See id. ¥ 1.

> See id. 4 10.

. According to one economist, the NFL, as a league, is valued at

slightly less than $18 billion. The National Basketball Association,

the next most valuable league, is valued at slightly less than $9

billion, Major League Baseball at approximately $7 billion, and the

National Hockey League at less than $5 billion. At $19.6 billion,

the NFL’s television contracts (the sale of the rights to air its

games) are more than the value of the NBA ($4.6 billion), MLB

League’s championship game -— is routinely the top-rated

television program of the year,’ and indeed, four of the top ten

highest-rated programs in television history are NFL football

games.

Not surprisingly, the League’s fiscal success also inures

to the benefit of its players. The average NFL player earned

$1,258,800 in 2003;° the average starting NFL running back

(which Clarett aspires to be) earned $1 578,275; "° the average

first-round draft choice (which Clarett also aspires to be) earned

($3.3 billion), and NHL ($600 million) television contracts

combined. See Justin Wolfers, The Business of Sports: Where’s the

Money?, at http://faculty-

gsb.stanford.edu/wolfers/Papers/Comments/The% 20Business%

200f% 20Sports.pdf.

‘ See Super Bowl Scores Big With Viewers, at http://

cbsnews.cbs.com/stories/2003/0 1/27/entertainment/main538085.sh

tml (Jan. 27, 2003) (“The Super Bowl is often the most-watched

TV program each year....”). Most recently, almost 90,000,000

Americans watched Super Bowl XXXVIII, held on February 1,

2004. See Top Ten Primetime Broadcast TV Programs For Week

of 1/26/04-2/1/04 (Feb. 3, 2004), at http://www.nielsenmedia.com.

* See T. op 10 Network Telecasts of All Time (Ranked By Household

Rating), available at http://www.nielsenmedia.com/. The only

other sporting event in the top ten television programs was the

showdown between Nancy Kerrigan and Tonya Harding at the

1994 Olympic Games in Norway. The other entrants on the top ten

list include the final episode of M*A*S*H (number one all-time),

the “Who Shot J.R.?” episode of Dallas (two), the final installment

of Roots (three), and a two-part serialization of Gone With the

Wind (eight and nine). /d.

> See M.J. Duberstein, 2003 Season Omnibus NFL Salary

Averages & Trends: Volume One—2003 Season Salary Averages

(NFLPA Research Dep’t 2004), at http://

www.nflpa.org/PDFs/Shared/2003_Season_Salary_& Signing _

Trends Omnibus January_2004.pdf.

10 Td. at 3.

$1,367,120;'' the minimum salary that a rookie may be paid is

$225,000.” In contrast, the 2000 salary cap in the Canadian

Football League — the total amount of money that a team was

| permitted to pay to all 50-odd of its players combined — was

| approximately $1,700,000.'? Similarly, the 2003 team salary

cap in the Arena Football League was $1,643,000.'* In other

words, the average starting running back in the NFL makes

only slightly less than the average teams do in the CFL and

AFL. In short, the NFL represents an unparalleled opportunity

for an aspiring football player in terms of salary, publicity,

endorsement opportunities, and level of competition.

Day-to-day operation of the League is handled by an

appointed Commissioner, currently Paul Tagliabue.'°

Representatives of each of the thirty-two teams, however,

comprise the National Football League Management Council

(“NFLMC’”), the exclusive collective bargaining representative

of the League.'®° The 1,400-odd NFL players are exclusively

represented by the National Football League Players

Association (“NFLPA”),'’ which was created in 1956.'* In

'! Td. at 99.

I See http://www.nationmaster.com/encyclopedia/American-

~ Professional-Football-Association

'3 See Canadian Football League Players Association, Collective

Bargaining in the 1990s, at

http://www.cflpa.com/CFLPA/history_1990s.html. The year 2000

team salary cap was set at approximately $2,280,000 Cdn., which

converts to roughly $1,700,000 at the current 1:.7472 exchange

rate. See generally http://www.bankofcanada.ca/en/exchform.htm.

14 See AFL/AFLPA CBA Term Sheet (Oct. 14, 2003), available at

http://www.aflplayers.org/documents/AF Ltermsheet.pdf.

- Tagliabue has been Commissioner of the NFL since 1989. See

NFL History: 1981-1990, at

http://www.nfl.com/history/chronology/1 981-1990.

16 See Ruocco Decl. q 2.

'” See id q 7.

1968, the NFLPA and the NFLMC entered into the League’s

first Collective Bargaining Agreement (“CBA”).'?

The current CBA took effect on May 6, 1993, and

expires in 2007.27 The CBA, along with the League’s

Constitution and Bylaws, comprehensively outlines the

relationship between the players and the League, covering the

operation of the League, player salary and the player draft,

including detailed rules by which the teams select new players.

Two provisions of the CBA are at issue here. Article III, section

1, provides:

This Agreement represents the complete

understanding of the parties on all subjects

covered herein, and there will be no change in

the terms and conditions of this Agreement

without mutual consent.... [T]he NFLPA and the

Management Council waive ail rights to

bargain with one another concerning any

subject covered or not covered in this

Agreement for the duration of this Agreement,

including the provisions of the NFL Constitution

and Bylaws....”'

18 See generally http://www.nflpa.org/.

' See Smith v. Pro-Football, 420 F.Supp. 738, 741 (D.D.C. 1976)

| (“As of March 5, 1968, the National Football League Players

Association became the exclusive bargaining agent and

representative of the NFL players. This union executed its first

collective bargaining agreement with the NFL owners in

November of 1968 ....”), aff'd in part and rev'd in part, 593 F.2d

1173 (D.C. Cir. 1978).

20 See Ruocco Decl. 4 7. The CBA appears to have been amended

(presumably not in a material way) as recently as January 8, 2002.

See Ex. D to Ruocco Decl.

| 7! See Ex. D to Ruocco Decl. (emphasis added).

| 6

arene hee ee eee me -

Article IV, section 2, entitled “No Suit,” provides:

[NJeither the NFLPA nor any of its members,

agents acting on its behalf, nor any members of

its bargaining unit will sue, or support

financially or administratively any suit against,

the NFL or any Club relating to the presently

existing provisions of the Constitution and

Bylaws of the NFL as they are currently

operative and administered...”

Clarett and the NFL disagree on whether these two

provisions establish that the NFL and the players union actually

bargained over the terms of the Constitution and Bylaws (which

contained the eligibility Rule at issue), or merely bargained

away the NFLPA’s ability to bargain over or challenge the

Bylaws’ provisions.”

B. The Rule

The NFL’s eligibility Rule precluding college

underclassmen from participating in the draft has been in force

— in one form or another — for decades.”* “It was adopted after

= See Ex. E to Ruocco Decl.

23 The NFL also points to Article IX of the CBA, in which the

NFLPA and NFLMC agree to resolve any dispute they may have

involving the interpretation or application of the CBA, the

Constitution, or the Bylaws in accordance with the CBA’s

grievance procedure. See id., Ex. F. The existence of Article IX

proves only that the parties bargained over a grievance procedure,

not that they bargained over the Constitution and Bylaws

themselves.

4 See Robert A. McCormick & Matthew C. McKinnon,

Professional Football’s Draft Eligibility Rule: The Labor

Exemption and the Antitrust Laws, 33 Emory L.J. 375, 377 & n. 12

(1984) (tracing the origin of the Rule to 1925).

Illinois’s star running back, Harold ‘Red’ Grange, stunned the

sports world by leaving school at the end of the 1925 college

season and joining the Chicago Bears of the five-year-old NFL

for a reported $50,000.” The original Rule precluded a player

from joining the NFL unless four seasons had elapsed since his

high school graduation; in 1990, the requirement was changed

to three seasons.”°

Notwithstanding the fact that the Rule predates the

CBA, the NFL maintains that “[d]uring the course of collective

bargaining that led to the 1993 CBA, the eligibility rule itself

was the subject of collective bargaining.””’ On May 6, 1993 —

the same day that the current CBA became effective — the

NFLPA and the NFLMC also executed a side letter

acknowledging that the Constitution and Bylaws attached to the

letter were referenced in the CBA. Among the various

°° Charles Lane, Clarett Lines Up Against NFL, Wash. Post, Jan.

23, 2004, at D1. See generally Benjamin G. Rader, American

Sports (1993) (“In 1925 Grange’s decision touched off a national!

debate. By abandoning his studies for a blatantly commercial

career, he openly flaunted the myth of the college athlete as a

gentleman-amateur who played merely for the fun of the game and

the glory of his school. Grange’s Illinois coach, Zup Zuppke,

joined a host of academics in condemning Grange. Not only was

professional football held in low moral esteem, but to them it was

unethical for Grange to capitalize upon a reputation that he had

acquired in college for direct, personal gain.”).

This information is provided by way of background only.

The record before the court only evidences that the rule is more

than 50 years old and predates the CBA and the formation of the

NFLPA. See Transcript, Clarett v. National Football League, 03

Civ. 7441 (S.D.N.Y. Sept. 30, 2003) (“Tr.”) at 12 (“Previous forms

of this rule go back ... 50 years”) (statement of Gregg Levy,

counsel to the NFL).

76 See Lane, Clarett Lines Up Against NFL.

77 Ruocco Decl. q 8.

28 see Ex. G to Ruocco Decl.; see also Ex. A to Ruocco Decl. (the

provisions of the 1993 Bylaws are comprehensive rules

describing who is eligible to play in the NFL. The Bylaws

provided that a player became eligible if he exhausted his

eligibility to play college football or graduated from college.”’

A player was also eligible if he was five years removed from

his first enrollment in college (or four years removed, if he

never played college football), regardless of whether he had any

remaining college eligibility° Finally, a player not otherwise

eligible could be granted “Special Eligibility.”>!

Such a player has been granted eligibility

through special permission of _ the

Commissioner. In order to _ receive

consideration for the League’s principal college

draft in any year, any application for special

eligibility must be in the Commissioner’s office

no later than January 6 of that year. For college

football players seeking special eligibility, at

least three NFL seasons must have elapsed

since the player was graduated from high —

school.”

Although by its plain language the Rule requires the

“special permission” of the Commissioner, that permission

appears to be routinely granted where a player falls within the

ambit of the Rule (i.e., is clearly three years removed from his

high school graduation).°°

pyaws:).

*, See Bylaws §§ 12.1(A)-(B).

See id. §§ 12.1(C)-(D).

3! See id. § 12.1(E).

32 See id. § 12.1(E) (emphasis added).

33 See, e. g., 4] Authorized to Leave Early for the Draft, Milwaukee

J. Sentinel, Jan. 20, 2004, at 3C. Where it is unclear whether a

In 2003, the form of the Rule changed yet again when

the NFILMC promulgated revised Bylaws.’ The record is

unclear as to whether these new Bylaws were the subject of

collective bargaining, although Article III, section 1 of the CBA

requires the NFLMC and NFLPA to negotiate in good faith any

changes that “could significantly affect the terms and

conditions of employment of NFL players.”

Under the 2003 version of the Bylaws, the Rule is

omitted altogether. In its place is a reference to a separate

memorandum promulgated by the Commissiorer under section

8.5 of the Bylaws.*° Section 8.5, in turn, provides that “[tjhe

Commissioner shall interpret and from time to time establish

policy and procedure in respect to the provisions of the

Constitution and Bylaws and any enforcement thereof.’?’

Thus, under the 2003 Bylaws, the Rule now exists only as

player qualifies for special eligibility, however, the Commissioner

has a modicum of discretion. For example, the Commissioner is

currently considering the application of University of Pittsburgh

wide receiver Larry Fitzgerald. Fitzgerald, like Clarett, is

completing his sophomore year of college. But unlike Clarett,

Fitzgerald spent a year at a prep school between high school and

college. According to press reports, the Commissioner is expected

to declare Fitzgerald eligible but is apparently delaying until after

this Court rules on the instant motions because it “does not want to

complicate matters for the judge in the Clarett case.” Fitzgerald

Announcement Likely a Formality (Feb. 1, 2004), at http://

sports.espn.go.com/ncf/news/story?id= 1724779.

* See Bylaws.

°° See Ex. D to Ruocco Decl.

6 See Bylaws (providing the following citation after section A of

“General Rules of Eligibility”: “See NFLNet Memorandum,

February 16, 1990, establishing pclicy and procedure pursuant to

Article VIII, Section 8.5, permitting college players to apply for

special draft eligibility if at least three football seasons have

cmaenes since their graduation from high school, App., p.1990-4.”).

57 See Ex. B to Ruocco Decl.

“policy and procedure” established by the Commissioner and

cited in the Bylaws. With respect to the 2004 draft, the

Commissioner has issued a release that includes the following

iteration of the Rule: |

SPECIAL ELIGIBILITY. Such player has

been granted eligibility through special

permission of the Commissioner. Any

applications for special eligibility must be in the

Commissioner’s office no later than Thursday,

January 15, 2004, if the player is to be

considered for inclusion in the League’s

principal draft scheduled for April 24-25, 2004.

Applications will be accepted only for college

players for whom at least three full college

seasons have elapsed since their high school

graduation. Players will not be permitted to

elect to bypass the January 15 deadline in order

to seek eligibility for a later supplemental draft,

and no supplemental draft will be held to

- accommodate such an election.*®

38 See National Football League Eligibility Rules (emphasis

added), Ex. D to Plaintiff's Reply Memorandum in Support of

Plaintiff's Motion for Summary Judgment (“Clarett Reply”). While

there is no independent authentication of this document, the Bates

stamp reflects that it was produced by the NFL.

The Rule as it exists in the Commissioner’s memorandum

requires a player to be three full college seasons removed from his

high school graduation, while the Rule contained in Section

12.1(E) of the 1993 Bylaws required a player to be three NFL

seasons removed from high school. In fact, the NFL and college

seasons are nearly coterminous, and the Commissioner has

interpreted the Rule in the same way since the 1991 draft. See Ex.

D to Clarett Reply (containing the Commissioner’s memoranda

regarding draft eligibility for every year between the 1991 and

2004 draft, all of which refer to “three full college seasons”).

It is this version of the Rule that Clarett challenges.

The NFL provides a number of justifications for the

Rule, arguing that it protects at least four different classes of

people. First, the NFL contends that the Rule protects the

people it excludes because they “are not sufficiently mature,

either physically or psychologically, to endure the rigors of

professional football.”°? Second, the Rule protects member

clubs who might suffer financial adversity resulting from

younger players’ peculiar susceptibility to injury.“° Third, the

Rule protects the League and its “entertainment product from

the adverse consequences associated with such injuries.””'

Fourth, the Rule protects young players who, if they declare but

are not drafted, would lose their eligibility to play college

football,” or who might over-train or experiment with

performance-enhancing drugs to speed their athletic

development.”

c. Maurice Clarett

See Ruocco Decl. 4 5. See also Declaration of Jordan D. Metz,

M.D. (“Metzl Decl.”) (attesting to the medical reasonableness of

the Rule).

40 See Ruocco Decl. 4 5. See also Memorandum of the National

Football League (1) in Opposition to Plaintiff's Motion for

Summary Judgment and (2) in Support of the NFL’s Cross-Motion

for Summary Judgment (Non-Statutory Labor Exemption) (“NFL

Mem.”) at 4 (arguing that the Rule “protect[s] the NFL clubs from

the costs and potential liability entailed by such injuries”).

*! NFL Mem. at 4.

*2 See Ruocco Decl. q{ 6. Once a player makes himself available to

be drafted into the NFL, he sacrifices any remaining collegiate

football eligibility under the rules of the National Collegiate

Athletic Association (“NCAA”).

43 See Metzl Decl. § 16.

Clarett, now twenty years old,” graduated high school

on December 11, 2001.* His credentials as a football player

are impressive. In the 2002-2003 collegiate season, Clarett —

the first freshman starter at running back for The Ohio State

University (“OSU”) since 1943*° — led his team to an

undefeated (14-0) season that was capped by a 31-24 double-

overtime victory over University of Miami in the Fiesta Bowl,

OSU’s first national championship in thirty-four years.*’ Asa

result of his freshman year resounding success, Clarett was

named the Big Ten Freshman of the Year and voted the best

running back in college football by The Sporting News.”

Clarett claims that he wanted to declare for the April

“4 See Affidavit of Maurice Clarett (“Clarett Aff.) 9 4, Ex. A to

the Declaration of Alan C. Milstein (“Milstein Decl.”), counsel to

Clarett.

* See id. 4 6.

"6 See id. q 7.

* See id. q 10. See generally Clarett Finds Way to Hurt “Canes in

Clutch” (Jan. 4, 2003), at http://

espn.go.com/ncf/bowls02/s/fiesta_ clarettclutch.html. In the Fiesta

Bowl, Clarett rushed for 47 yards and 2 touchdowns —including the

winning score in double-overtime. See http://

Sports.espn.go.com/nci/boxscore? gameld=230032390.

*8 See Clarett Aff. 4 11. The Big Ten is a collegiate athletic

conference that includes eleven schools: University of Illinois,

Indiana University, University of lowa, University of Michigan,

Michigan State University, University of Minnesota, Northwestern

University, OSU, The Pennsylvania State University, Purdue

University and University of Wisconsin. In the 2002-2003 season,

when Clarett was named Big Ten Freshman of the Year, the Big

Ten was a particularly competitive conference, with OSU, Iowa,

Michigan and Penn State all finishing among the top fifteen teams

in the three major college football rankings (the Bowl

Championship Series, Associated Press poll, and USA

Today/ESPN poll). See http://espn.go.com/abcsports/bcs/rankings/.

2003 NFL draft after his strong freshman season,” but offers no

explanation as to why he did not challenge the Rule at that

time. Clarett’s status changed in September 2003, however,

when OSU and the NCAA suspended him for the entire 2003-

2004 season.’ As a result, he did not play during the just-

concluded college football season. Moreover, there appears to

be some question as to whether the NCAA will permit him to

play in the 2004-2005 season.*' Clarett’s decision to seek

eligibility for the 2004 draft may have resulted, in part, from

this suspension. The NFL may be his only real option for

playing football next year.

Clarett, who is six feet tall and weighs 230 pounds,” is

taller and heavier than some of the NFL’s all-time greatest

running backs, including Walter Payton (5’10”, 200), Barry

Sanders (5’8”, 203) and Emmitt Smith (5’9”, 207).*? While

sportswriters disagree about which team would draft him and in

which round, there seems to be little doubt that Clarett is an

NFL-caliber player who would be drafted if he were eligible to

* See Clarett Aff. § 12.

»° See generally Rusty Miller, Clarett Suspended for 2003 for 16

NCAA Violations (Sept. 10, 2003), available at

http://www.usatoday.com/spor ts/college/football/bigten/2003-09-

10-clarett-suspension_x.htm.

>! See Memorandum of Law in Support of Plaintiff's Motion for

Summary Judgment (“Clarett Mem.”) at 9.

2 See id.

*3 See Bob Carroll, et al., eds., Total Football I]: The Official

Encyclopedia of the National Football League (1999), Ex. H. to

Milstein Decl. Although size is not always an asset to a running

back, see Bob Glauber, Clarett No Lock for First Round, Newsday,

Sept. 28, 2003, at B7, some of the greatest running backs have also

been larger than Clarett (e.g., Hall of Famers Jim Brown (6’2”,

232) and Larry Csonka (6’3”, 240)). See Jim Brown, at http://

www.clevelandbrowns.com/history/hof_brownj.php; Biography, at

http://www. larrycsonka.com/bio/.

| rien cee.

participate in the process.”* Thus, only the Rule stands between

Clarett and the opportunity to play in the NFL next year.”

D. Procedural History

This case has progressed rapidly, virtually rushing

toward the goal line because of the imminence of the 2004

draft. Clarett filed suit on September 23, 2003. At the initial

scheduling conference, held one week later, both parties

informed the Court that they intended to move for summary

judgment. After limited document discovery, the parties’ cross-

motions for summary judgment were fully submitted on

December 11, 2003. In two separate motions, the NFL asks for

summary judgment on its defenses that (1) the Rule is protected

ied *= ompare Michael Wilbon, For Clarett, It’s a Bad Move, Wash.

Post, Sept. 25, 2003, at D1 (questioning whether Clarett is worthy

of a top pick in the NFL draft) with Bob Glauber, Clarett Sues

NFL for Right to Enter Draft, Newsday, Sept. 24, 2003, at A60

(reporting that “according to several league executives,” if Clarett

were in the 2004 draft, “it’s likely he would be a first-round

choice.”). See also Complaint (“Compl.”) J 31 (“Had Clarett been

eligible for the 2003 Draft, it is almost certain he would have been

selected in the beginning of the First Round and would have

agreed to a contract and signing bonus worth millions of dollars.”).

» Clarett argues that he actually is eligible under the Rule. Even if

that question were properly before the Court — which it is not — it

seems plainly incorrect under the current version of the Rule,

which requires three full college football seasons to have elapsed

since a player’s high school graduation. A college football season

runs from roughly late August (OSU played its first game this past

year on August 30) to early January, if bowl games are included

(OSU played its final game on January 2), or late November if they

are not (OSU played its final regular season game on November

22). Clarett graduated high school in December 2001. Thus, only

two full college seasons have elapsed since his graduation: the

season running from August 2002 to January 2003, and the season

running from August 2003 to January 2004.

from antitrust scrutiny by the nonstatutory labor exemption; and

(2) Clarett lacks antitrust standing. Clarett, in turn, seeks

summary judgment on his single antitrust clam. The NFL

opposes Clarett’s motion, claiming that if the suit is not

dismissed on the grounds set forth in its motions, a trial is

needed to determine whether the Rule is a reasonable restraint

of trade.

lil. LEGAL STANDARD

Rule 56 of the Federal Rules of Civil Procedure

provides for summary judgment “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with

the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to

judgment as a matter of law.”°° “An issue of fact is ‘genuine’

if ‘the evidence is such that a reasonable jury could return a

verdict for the nonmoving party.””°’ A fact is material when it

~ might affect the outcome of the suit under the governing

law.”

A party seeking summary judgment has the burden of

demonstrating that no genuine issue of material fact exists.” In

turn, to defeat a motion for summary judgment, the non-moving

party must raise a genuine issue of material fact. To do so, he

°° Fed.R.Civ.P. 56(c). See also Celotex Corp. v. Catrett, 477 U.S.

317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

*7 Electrical Inspectors, Inc. v. Village of East Hills, 320 F.3d 110,

117 (2d Cir.2003) (quoting Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)), cert.

denied sub nom. Village of Islandia v. Electrical Inspectors, Inc.,

540 U.S. 982, 124 S.Ct. 467, 157 L.Ed.2d 373 (2003).

*8 Id. (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505).

»? See Apex Oil Co. v. DiMauro, 822 F.2d 246, 252 (2d Cir.1987)

(citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct.

1598, 26 L.Ed.2d 142 (1970)).

“must show more than a ‘metaphysical doubt’ as to material

facts,” and he may not rely on conclusory allegations or

unsubstantiated speculation.®’ Rather, the non-moving party

must produce admissible evidence that supports his pleadings.”

In this regard, “[t]he ‘mere existence of a scintilla of evidence’

supporting the non-movant’s case is also insufficient to defeat

summary judgment.””

In determining whether a genuine issue of material facts

exists, the court must construe the evidence in the light most

favorable to the non-moving party and draw all inferences in

that party’s favor.“ Accordingly, the court’s task is not to

“weigh the evidence and determine the truth of the matter but to

determine whether there is a genuine issue for trial.”©

Summary judgment is therefore inappropriate “if there is any

evidence in the record that could reasonably support a jury’s

verdict for the non-moving party.” Nonetheless, the Second

6° Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986))

6! See Twin Labs., Inc. v. Weider Health & Fitness, 900 F.2d 566,

568 (2d Cir.1990) (holding that “[cJonclusory allegations will not

suffice to create ... a genuine issue” of material fact sufficient to

overcome a motion for summary judgment); see also Fujitsu Ltd.

v. Federal Express Corp., 247 F.3d 423, 428 (2d Cir.2001).

253, 289-90, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968).

= Niagara Mohawk Power Corp. v. Jones Chem. Inc., 315 F.3d

171, 175 (2d Cir.2003) (quoting Anderson, 477 U.S. at 252, 106

S.Ct. 2505). See also Twin Labs., 900 F.2d at 568 (“There must be

more than a scintilla of evidence, and more than some

metaphysical doubt as to the material facts.”) (quotation marks and

citations omitted).

” Niagara Mohawk, 315 F.3d at 175 (citing Anderson, 477 U.S. at

252, 106 S.Ct. 2505).

®° Anderson, 477 U.S. at 249, 106 S.Ct. 2505.

6 Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286 (2d

Circuit has remarked that “[i]n the context of antitrust cases ...

summary judgment is particularly favored because of the

concern that protracted litigation will chill pro-competitive

market forces.’””

IV. DISCUSSION

Clarett is suing the NFL under section | of the Sherman

Antitrust Act™ and section 2 of the Clayton Act.” He alleges

that the Rule is an illegal restraint of trade because the teams

have agreed to exclude a broad class of players from the NFL

labor market, thereby constituting a “group boycott.” In

Cir.2002) (emphasis added) (citing Pinto v. Allstate Ins. Co., 221

F.3d 394, 398 (2d Cir.2000)). See also Trans Sport, Inc. v. Starter

Sportswear, Inc., 964 F.2d 186, 188 (2d Cir.1992) (Thurgood

Marshall, J., retired and sitting by designation).

®7 PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 104 (2d

Cir.2002). See also Capital Imaging Assocs., P.C. v. Mohawk

Valley Med. Assocs., Inc., 996 F.2d 537, 541 (2d Cir.1993).

8 15 U.S.C. § 1. The Sherman Act prohibits “[e]very contract,

combination ... or conspiracy, in restraint of trade.” Jd.

® Private plaintiffs cannot sue directly under the Sherman Act.

Rather, section 2 of the Clayton Act creates a private right of

action for “any person who shall be injured in his business or

property by reason of anything forbidden in the antitrust laws.” Jd.

$15.

10 See Compl. ¥§ 32-43. “Group boycotts ... generally consist of

agreements by two or more persons not to do business with other

individuals, or to do business with them only on specified terms.”

Balaklaw v. Lovell, 14 F.3d 793, 800 (2d Cir.1994); see also

Haywood v. National Basketball Ass ’n, 401 U.S. 1204, 1206, 91

S.Ct. 672, 28 L.Ed.2d 206 (1971) (Douglas, J.) (describing a

similar age-based eligibility restriction in the NBA as posing a

“significant” “group boycott issue in professional sports”). Group

boycotts are also sometimes referred to as “concerted refusals to

deal.” See 13 Phillip E. Areeda & Herbert Hovenkamp, Antitrust

Law § 2200 (2000).

5 UNI

order to prevail on that claim, Clarett must demonstrate that he

is entitled to judgment on the merits. However, he must first

overcome the two affirmative defenses asserted by the NFL: (1)

that the Rulfé is immune from the antitrust laws, and (2) that

Clarett lacks standing to bring an antitrust claim.

A. The Nonstatutory Labor Exemption

The NFL argues that the Rule is immune from antitrust

scrutiny based on what has come to be known as the

“nonstatutory labor exemption.” If the NFL is correct, the

exemption provides a complete defense to Clarett’s suit.

Accordingly, I address the application of the nonstatutory labor

exemption at the outset.

1. Purpose and Background of the Nonstatutory

Labor Exemption

In order to answer the question of whether the Rule is

subject to the antitrust laws, a brief discussion of the labor

exemptions — which collectively immunize otherwise

anticompetitive conduct from antitrust scrutiny — is required.

The statutory exemptions, contained in provisions of the _

Clayton Act”! and the Norris-LaGuardia Act,” exempt certain

activities engaged in by labor unions.” The nonstatutory

exemption, created by the courts, was designed to favor labor

law over antitrust law by permitting collective bargaining

| See 15 U.S.C. § 17; 29 U.S.C. § 52.

72 See 29 U.S.C. §§ 104, 105, 113.

3 See Connell Constr. Co. v. Plumbers & Steamfitters Local

Union No. 100, 421 U.S. 616, 621-22, 95 S.Ct. 1830, 44 L.Ed.2d

418 (1975). The statutory exemption immunizes traditional union

conduct — such as boycotts and secondary picketing — that would

otherwise unquestionably qualify as concerted action in restraint of

trade. See, e.g., United States v. Hutcheson, 312 U.S. 219, 61 S.Ct.

463, 85 L.Ed. 788 (1941).

between unions and employers over wages, hours and working

conditions. Because the Rule is not covered by the statutory

exemption, it is subject to the antitrust laws unless the

nonstatutory labor exemption applies.’

The Supreme Court has “implied this [nonstatutory]

exemption from federal labor statutes, which set forth a national

labor policy favoring free and private collective bargaining,

which require good-faith bargaining over wages, hours, and

working conditions ... .”’> Thus, the Court recognized the

primacy of collective bargaining in the workplace, even when

the agreements reached through that bargaining would

otherwise violate the antitrust laws’ prohibition on

combinations in restraint of trade:

As a matter of logic, it would be difficult, if not

impossible, to require groups of employers and

employees to bargain together, but at the same

time to forbid them to make among themselves

or with each other any of the competition-

restricting agreements potentially necessary to

make the process work or its results mutually

acceptable. Thus, the implicit exemption

recognizes that, to give effect to federal labor

laws and policies and to allow meaningful

collective bargaining to take place, some

restraints on competition imposed through the

bargaining process must be shielded from

”* See id. at 622, 95 S.Ct. 1830 (citing Local Union No. 189,

Amalgamated Meat Cutters, and Butcher Workmen of N. Am. v.

Jewel Tea Co., 381 U.S. 676, 85 S.Ct. 1596, 14 L.Ed.2d 640

(1965)).

"> Brown v. Pro Football, Inc., 518 U.S. 231, 236, 116 S.Ct. 2116,

135 L.Ed.2d 521 (1996) (emphasis added, citations omitted).

antitrust sanctions. °

While the Second Cireuit has not adopted a test that

controls the application of the nonstatutory labor exemption,

three other circuits have. The Sixth, Eighth and Ninth Circuits

have looked to the following three-factored test:

First, the labor policy favoring collective

bargaining may potentially be given pre-

eminence over the antitrust laws where the

restraint on trade primarily affects only the

parties to the collective bargaining relationship.

Second, federal labor policy is implicated

sufficiently to prevail only where the agreement

sought to be exempted concerns a mandatory

subject of collective bargaining. Finally, the

policy favoring collective bargaining is

furthered to the degree necessary to override the

antitrust laws only where the agreement sought

to be exempted is the product of bona fide

arm’s-length bargaining.”

In amore recent case, the Second Circuit acknowledged

the test promulgated by the Eighth Circuit, but preferred to

apply the simple formulation enunciated by the Supreme Court

in Local Union No. 189 v. Jewel Tea Co. In doing so, the

Second Circuit held that the appropriate test is “one that

balances the conflicting policies embodied in the labor and

7 Id. at 237, 116 S.Ct. 2116 (second emphasis added); see also id.

at 254, 116 S.Ct. 2116 (Stevens, J., dissenting).

” Mackey v. National Football League, 543 F.2d 606, 614 (8th

Cir.1976) (emphasis added; citations and footnotes omitted);

accord Continental Maritime of San Francisco, Inc. v. Pacific

Coast Metal Trades District Council, 817 F.2d 1391, 1393 (9th

Cir.1987); McCourt v. California Sports, Inc., 600 F.2d 1193,

1197-98 (6th Cir.1979).

antitrust laws, with the policies inherent in labor law serving as

the first point of reference.””®

First, the agreement at issue must further goals that are

protected by national labor law and that are within the scope of

traditionally mandatory subjects of collective bargaining.

Second, the agreement must not impose a “direct restraint on

the business market [that] has substantial anticompetitive

effects, both actual and potential, that would not follow

naturally from the elimination of competition over wages and

working conditions [that result from collective bargaining

agreements].”””

Thus, because the labor laws only require collective

bargaining as to certain subjects, and the nonstatutory labor

exemption was designed to shield from antitrust scrutiny

conduct that is mandated under the labor laws, the exemption is

limited to policies that affect “traditionally mandatory subjects

of collective bargaining.”®°

y & The Scope of the Nonstatutory Labor

Exemption

Under the National Labor Relations Act, mandatory

”8 Local 210, Laborers’ Int'l Union of N. Am. v. Labor Relations

Div. Associated Gen. Contractors of Am., 844 F.2d 69, 79 (2d

Cir.1988); see also id. at 80 n. 2 (“Although we believe that the

agreement in the instant case could satisfy [the Eighth Circuit’s

Mackey] test, we need not adopt this particular analysis. Rather, we

rely on ... Jewel Tea.”).

”9 Td. at 79-80 (emphasis added, citations omitted, alterations in

original) (quoting Connell Constr., 421 U.S. at 625, 95 S.Ct.

1830).

80 Id. at 79. The NFL does not dispute that the nonstatutory

exemption applies only to agreements regarding mandatory

subjects of bargaining. See NFL Mem. at 13-14.

subjects of bargaining between employers and unions pertain to

“wages, hours, and other terms and conditions of

employment.”®! Only agreements on these subjects (and

intimately related subjects) are exempt from the antitrust

laws.* In Jewel Tea, the Court succinctly summarized the issue

before it: “[WJhether the marketing hours restriction [during

which butchers could sell fresh meat}, like wages, and unlike

prices is so intimately related to wages, hours and working

conditions that ... [it] falls within the protection of the national

labor policy and is therefore exempt from the Sherman Act.”

By contrast, the Court noted that Jewel Tea, a chain of food-

marketing stores, “need not have bargained about or agreed to a

schedule of prices at which its meat would be sold.”*

More recently, in Brown v. Pro Football, Inc., the Court

reiterated that the exemption is limited to mandatory subjects of

collective bargaining and covers only conduct that arises from

the collective bargaining process.®° In Brown, the question

81 59 U.S.C. § 158(d); see also NLRB v. Borg-Warner Corp., 356

U.S. 342, 78 S.Ct. 718, 2 L.Ed.2d 823 (1958).

82 coe Jewel Tea, 381 U.S. at 689, 85 S.Ct. 1596; see generally 1A

Areeda & Hovenkamp, Antitrust Law § 257c (noting that “there

seems to be a single taproot [for application of the labor

exemptions]: whether the challenged activities are seen as

‘legitimate’ labor activities directed at the wages, hours, and

working conditions of the employees.”).

83 Td. at 689-90, 85 S.Ct. 1596; see also Michael S. Jacobs &

Ralph K. Winter, Jr., Antitrust Principles and Collective

Bargaining by Athletes: Of Superstars in Peonage, 81 Yale L.J. 1,

24 (1971) (“Important in Justice White’s calculus was the fact that

the marketing hours provision was a subject ‘well within the realm

of wages, hours and other terms and conditions of employment’

about which employers and unions must bargain’”) (quoting Jewel

Tea, 381 U.S. at 691, 85 S.Ct. 1596).

84 Jewel Tea, 381 U.S. at 689, 85 S.Ct. 1596 (emphasis added).

85 518 U.S. 231, 116 S.Ct. 2116, 135 L.Ed.2d 521.

was whether a unilateral decision by team owners to impose a

salary cap on NFL practice squad players violated the antitrust

laws when that cap was imposed by team owners after reaching

a bargaining impasse with the NFLPA. In holding that the

nonstatutory labor exemption applied to this wage limitation,

the Court noted that “impasse and an accompanying

implementation of proposals constitute an integral part of the

bargaining process.”*° The Court repeatedly stated that the

purpose behind the exemption is to support the collective

bargaining process and ensure that it works in the manner

intended by Congress.

Finally, the exemption can only cover actions that affect

employees within the bargaining unit or those who seek to

become employees and who will therefore be bound by those

actions.®’ It is axiomatic that wages, hours, and other

conditions of employment — such as employee benefits — can

only apply to employees.

3 The Rule Is Not Covered by the Nonstatutory

Labor Exemption

a. The Rule Does Not Address a

Mandatory Subject of Collective

Bargaining

The Rule provides that for college players seeking

special eligibility, “at least three full college seasons [must]

have elapsed since their high school graduation.”*® Nowhere is

there a reference to wages, hours, or conditions of employment.

Indeed, the Rule makes a class of potential players

unemployable. Wages, hours, or working conditions affect only

86 Td. at 239, 116 S.Ct. 2116 (emphasis added).

87 See Mackey, 543 F.2d at 614.

88 see supra note 38.

those who are employed or eligible for employment.

The NFL argues that “[i]f the draft itself is protected by

the non-statutory labor exemption, it follows a fortiori that

rules governing eligibility for the draft ... are also protected by

the exemption.”®’ In support of this proposition, the NFL relies

heavily on three recent Second Circuit cases all arising in the

context of professional sports.” However, each of those cases

involve practices that affect wages, hours or working

conditions.

In Wood v. National Basketball Association, a college

basketball player was a first-round draft choice in the 1984

college draft. Once drafted, Wood challenged three league

provisions: (1) a team’s exclusive right to bargain with its draft

choice for a period of one year; (2) the salary cap that permitted

the team to offer a first-year draftee only $75,000 if that team

had reached its maximum allowable team salary; and (3) a

limitation on player corporations utilized by players to create

tax advantages.’! The Second Circuit held that the nonstatutory

labor exemption barred Wood’s action. The court explained:

“The gravamen of Wood’s complaint, namely that the NBA-

NBPA collective agreement is illegal because it prevents him

from achieving his full free market value, is ... at odds with, and

destructive of, federal labor policy.””* The point is not hard to

grasp. Wood was drafted and then challenged the agreement

between the league and the players union that limited his right

to negotiate about certain conditions of his employment —

89 NFL Mem. at 13-14.

% See Caldwell v. American Basketball Ass'n, 66 F.3d 525 (2d

Cir.1995); National Basketball Ass’n v. Williams, 45 F.3d 684 (2d

Cir.1995); Wood v. National Basketball Ass’n, 809 F.2d 954 (2d

Cir.1987).

9! See Wood, 809 F.2d at 957-58.

9 Id. at 959.

namely which team he would play for, how much he would

earn, and how he would receive his salary. Indisputably, these

all involve wages and conditions of employment and are thus

mandatory subjects of bargaining.”

National Basketball Association v. Williams also

involved a dispute between the players and the league over the

draft and the salary cap. A collective bargaining agreement, set

to expire in 1994, governed the relationship between the players

and the league.” During negotiations for a new CBA, the

players sought elimination of three provisions of the expiring

CBA: (1) the workings of the college draft whereby once

drafted a player could only negotiate with the team that drafted

him; (2) the right of first refusal permitting a team to match any

offer made by another team to one of its current players; and (3)

the revenue sharing/salary cap system establishing an overall

wage framework.” The negotiations eventually reached an

impasse, and the league brought an action seeking a declaration

that the disputed provisions of the CBA did not violate the

antitrust laws by virtue of the nonstatutory exemption.” The

court agreed. Following Wood, the court held that each of the

disputed terms governed players who are or would be employed

by the league, and addressed the players’ rights to negotiate

over the team they will play for and the salary they will earn.

These topics, by definition, concern the terms and conditions of

employment that attach once a player is drafted.

*3 The court held that the NBA’s salary cap and college draft “are

mandatory subjects of bargaining” because “[e]ach of them clearly

_is intimately related to wages, hours, and other terms and

conditions of employment.” /d. at 962 (quotation marks and

citations omitted).

4 See Williams, 45 F.3d at 686.

See id. at 686.

a |

Finally, in Caldwell v. American Basketball

Association, the plaintiff challenged his discharge. Caldwell

claimed that he was wrongfully discharged because of his

activities as the president of the players union, and that the

league refused to employ him for those activities. The league

asserted that Caldwell no longer had the physical capacity to

play basketball. Caldwell sued the league alleging that his

exclusion violated the antitrust laws. Holding that the

nonstatutory labor exemption applied, the court stated that

“Caldwell’s right to challenge a discharge by the [league] had

to be founded on labor rather than antitrust law.”””’ In

discussing both Caldwell’s discharge and the league’s refusal to

employ him, the court stated that, “ [t]his dispute is the familiar

case of an employee asserting a discharge based on union

activities.”°® While the court used broad language in holding

that the league’s policy regarding player suspension fell within

the nonstatutory labor exemption because “a mandatory subject

of bargaining pertinent in the instant matter is the

circumstances under which an employer may discharge or

refuse to hire an employee,” the decision makes clear that the

court treated the refusal to hire as synonymous with the

dismissal.” The point is simple. Caldwell addresses a

mandatory subject of bargaining — namely the conditions under

which an employer may terminate an employee.

In sum, none of the cases cited by the NFL involve job

eligibility. The league provisions addressed in Wood, Williams,

*7 Caldwell, 66 F.3d at 530.

99 Id. at 528; see also id. at 529 (“Caldwell’s claim regarding his

discharge ....”) (emphasis added). The court noted that Congress ©

intended that this type of dispute should be heard by the National

Labor Relations Board rather than the courts. If this were not the

case, “every employee who is discharged could bring an antitrust

action similar to Caldwell’s.” Jd. (emphasis added).

and Caldwell govern the terms by which those who are drafted

are employed. The Rule, on the other hand, precludes players

from entering the labor market altogether, and thus affects

wages only in the sense that a player subject to the Rule will

earn none. But the Rule itself, for the reasons just discussed,

does not concern wages, hours, or conditions of employment

and is therefore not covered by the nonstatutory labor

exemption.

b. The Nonstatutory Labor Exemption

Cannot Apply to Those Who Are

Excluded from the Bargaining Unit

The exemption is also inapplicable because the Rule

only affects players, like Clarett, who are complete strangers to

the bargaining relationship. The labor laws cannot be used to

shield anticompetitive agreements between employers and

unions that affect only those outside of the bargaining unit.”

There is no dispute that collective bargaining agreements, and

therefore the nonstatutory labor exemption, apply to both

orospective and current employees. Newcomers to an

industry may not object to provisions of collective bargaining

agreements that speak to wages, hours, or conditions of

employment on the grounds that they were not present for the

bargaining sessions. “[N]ewcomers in the industrial context

routinely find themselves disadvantaged vis-a-vis those already

hired .... that is [ ] a commonplace consequence of collective

agreements.”!°* Indeed, the Wood court held that a player,

100 See Mackey, 543 F.2d at 614 (“[T]he labor policy favoring

collective bargaining may potentially be given pre-eminence over

the antitrust laws where the restraint on trade primarily affects only

the parties to the collective bargaining relationship.”) (emphasis

added).

101 See generally Wood, 809 F.2d at 960.

? Id. at 960.

once drafted, could not object to the league’s salary structure on

the grounds that he never consented to the collective bargaining

agreement. 8

Clarett’s situation is very different. He is not permitted

to be drafted — allegedly because the NFL and the union agreed

to exclude players in his class. But Clarett’s eligibility was not

the union’s to trade away. Indeed, the Rule does not deal with

the rights of any NFL players or draftees. That the nonstatutory

exemption does not apply in such a case is simply the flip side

of the rule that the exemption only applies to mandatory

subjects of collective bargaining, those governing wages, hours,

and working conditions. Employees who are hired after the

collective bargaining agreement is negotiated are nonetheless

bound by its terms because they step into the shoes of the

players who did engage in collective bargaining. But those

who are categorically denied eligibility for employment, even

temporarily, cannot be bound by the terms of employment they

cannot obtain. For this reason, too, the nonstatutory exemption

does not apply.

Cc. The NFL Has Failed to Show that the

Rule Arose from Arm’s Length

Negotiations

The nonstatutory exemption does not apply for a third

reason: the NFL has failed to demonstrate that the Rule evolved

from arm’s-length negotiations between the NFLMC and the

NFLPA. If there is any doubt on this issue, the NFL is not

103 The district court’s holding was especially clear on this point:

At the time an agreement is signed between the owners and the

players’ exclusive bargaining representative, all players within the

bargaining unit and those who enter the bargaining unit during the

life of the agreement are bound by its terms. Wood v. National

Basketball Ass’n, 602 F.Supp. 525, 529 (S.D.N.Y.1984), aff'd, 809

F.2d 954.

entitled to summary judgment on this defense.

The record is peculiarly sparse in establishing the

evolution of the Rule. Indeed, what the record omits speaks

louder than what it contains. As noted above, the Rule was first

adopted shortly after the 1925 draft.'“ The NFLPA was not

formed until 1956, did not become the players’ exclusive

bargaining agent until 1968,'° and the first collective

bargaining agreement was not adopted until 1968.'° From

these meager facts, it seems quite clear that the first version of

the Rule could not have arisen from the collective bargaining

process. The NFL offers no evidence that the Rule was

addressed during collective bargaining negotiations prior to

1993.

The only evidence that it was addressed in 1993 is the

following conclusory statement from the Declaration of Peter

Ruocco: “During the course of collective bargaining that led to

the 1993 CBA, the eligibility rule itself was the subject of

collective bargaining.”’”’ But the CBA never mentions the

Rule. Rather, the CBA states that the NFLPA “waive/s/ ... its

rights to bargain over any provision of the Constitution and

Bylaws ... to sue the NFL over any provision of the

Constitution and Bylaws ... [and] to resolve any dispute ...

involving the interpretation or application of the Constitution

and Bylaws in accordance with the dispute resolution

procedures of the CBA.” While these references to the 1993

Bylaws, which in fact contained the then-existing version of the

Rule, demonstrate that the union agreed not to bargain over or

104 See supra note 25.

105 See Smith, 420 F.Supp. at 741.

106 :

See id.

'07 Ruocco Decl. q 8.

wee (referencing Articles III, IV, and IX of the 1993 CBA)

(emphasis added).

challenge the Rule, they in no way demonstrate that the Ruie

itself arose from, or was agreed to during, the process of

collective bargaining. Quite the contrary. As noted, the CBA

states that the “NFLPA waived ... its rights to bargain over any

provision of the Constitution and Bylaws.” Thus the only

proof submitted by the NFL strongly suggests that the Rule was

never the subject of collective bargaining between the League

and the union, and did not arise from the collective bargaining

process.’

While Clarett offers no evidence on the issue of arm’s-

length bargaining, he certainly highlights the NFL’s absence of

proof. Because the NFL has not demonstrated that the Rule

evolved from this process, the NFL is not entitled to summary

judgment based on the nonstatutory labor exemption.

B. Antitrust Standing

Having rejected the application of the nonstatutory labor

exemption, I turn next to the merits of Clarett’s antitrust claim.

In order to assert that claim, Clarett must demonstrate that he

109 £x. D to Ruocco Decl. (emphasis added).

110 The NFL makes much of a side letter dated May 6, 1993. This

letter adds nothing to the record. The letter is from the general

counsel of the NFLPA to the attorney for the NFLMC. The full

text of the letter follows: “This letter confirms that the attached

documents are the presently existing provisions of the Constitution

and Bylaws of the NFL referenced in Article IV, Section 2, of the

Collective Bargaining Agreement.” Ex. G to Ruocco Decl. Indeed,

the 2003 version of the Rule is now omitted from the Bylaws.

Instead, the Bylaws now refer to a memorandum from the

Commissioner issued pursuant to his power to establish policy and

procedure with respect to the Constitution and Bylaws. The

Commissioner has issued a release that describes the eligibility for

the 2004 draft. That release maintains the Rule excluding players

less than three years removed from high school graduation.

| ee EN ene

has suffered an antitrust injury.)

1. The Antitrust Injury Requirement

Antitrust injury — an element of antitrust standing! — is

(1) “injury of the type the antitrust laws were intended to

prevent” and (2) injury “that flows from that which makes

defendants’ acts unlawful.”''? As explained by the Supreme

Court in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., the

antitrust injury doctrine is designed to ensure that “the injury ...

reflect[s] the anticompetitive effect either of the violation or of

anticompetitive acts made possible by the violation.”''* The

Supreme Court has further explained the requirement as

“ensuring that the harm claimed by the plaintiff corresponds to

the rationale for finding a violation of the antitrust laws in the

Il Brunswick C orp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,

489, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977); see also Atlantic

Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 341-42, 110

S.Ct. 1884, 109 L.Ed.2d 333 (1990).

12 In Associated Gen. Contractors of California, Inc. v. California

State Council of Carpenters, 459 U.S. 519, 537-45, 103 S.Ct. 897,

74 L.Ed.2d 723 (1983), the Supreme Court identified additional

factors for lower courts to consider in determining whether a

particular p!aintiff has standing to bring suit under the antitrust

laws. Those factors include: (1) the causal connection between an

antitrust violation and the alleged harm suffered by the plaintiff;

(2) the nature of the plaintiff's antitrust injury; (3) the directness or

remoteness of the asserted injury; (4) the existence of more direct

and identifiable victims of the antitrust violation; and (5) the -

potential for duplicative recovery or complex apportionment of

damages. See also Verizon Communications Inc. v. Law Offices of

Curtis V. Trinko, L.L.P., 540 U.S. 398, 124 S.Ct. 872, 884, 157

L.Ed.2d 823 (2004) (Stevens, J., concurring). The NFL does not

object to Clarett’s antitrust standing, apart from its challenge to his

asserted antitrust injury.

aa Brunswick Corp., 429 U.S. at 489, 97 S.Ct. 690.

Id.

first place,” and more specifically, it “ensures that a plaintiff

can recover only if the loss stems from a competition-reducing

aspect or effect of the defendant’s behavior.”''* Thus, the

antitrust injury requirement codifies the well-known motto of

the Sherman Act, “The antitrust laws ... were enacted for “the

protection of competition not competitors.””''®

ye Clarett Has Antitrust Standing

Clarett alleges that the NFL’s Rule constitutes a “group

boycott” that restrains trade in the NFL labor market by

erecting a barrier to market entry.''’ For reasons discussed in

greater detail below, the Rule is a naked restraint on

competition for player services because it excludes a class of

players from entering the market. It harms competition because

some players are simply not permitted to compete.''* Clarett’s

injury — his exclusion from the NFL — flows directly from the

anticompetitive effects of the Rule, and thus constitutes

. antitrust injury. Accordingly, Clarett has antitrust standing.

Indeed, three courts have reached the merits of almost identical

claims that challenged, on antitrust grounds, the validity of

restrictions barring younger players from competing for

positions in various sports leasues.'!”

15 Avlantic Richfield, 495 U.S. at 342-44, 110 S.Ct. 1884

(emphasis in original).

116 By unswick Corp., 429 U.S. at 488, 97 S.Ct. 690 (quoting Brown

Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 8

L.Ed.2d 510 (1962)) (emphasis in original).

"7 See Compl. {§ 34-35 (“The Rule is a per se violation of the

Sherman Act.... The Rule is a group boycott and a concerted

refusal to deal with individuals such as Clarett.”).

118 cee infra Part IV.C.3.a.

119 See Boris v. United States Football League, No. 83 Civ. 4980,

1984 WL 894 (C.D.Cal. Feb. 28, 1984); Linseman v. World

Hockey Ass'n, 439 F.Supp. 1315 (D.Conn. 1977); Denver Rockets

The Rule Need Not Affect Price or

Output for Clarett to Have an

Antitrust Injury

Nonetheless, the NFL argues that Clarett has no

antitrust injury, and therefore no standing, because the Rule has

no effect on either price (defined as player salary) or output

(defined as the number of jobs) in the relevant market. The

NFL relies on the Seventh Circuit’s decision in Chicago

Professional Sports Ltd. Partnership v. National Basketball

Association, where Judge Easterbrook suggested that “[t}he

antitrust injury doctrine ... requires every plaintiff to show that

its loss comes from acts that reduce output or raise prices to

consumers.”'?” The NFL reasons that the Rule has no effect on

price because player salaries are prescribed by the League’s

salary cap, which teams consistently meet, and does not affect

output, because League rules limit the number of roster spots

available to each team, which each team consistently fills.

Because price and output are therefore relatively static, the NFL

concludes that Clarett has no antitrust injury.

Such a rigid “price or output” rule finds little support in

the case law. Even within the Seventh Circuit, the validity of

the Chicago Professional Sports rule is debatable. First, the

rule itself is plain dicta. As the court conceded at the outset,

“[a]ntitrust injury is one subject in particular that has not been

v. All-Pro Management, Inc., 325 F.Supp. 1049 (C.D.Cal.1971).

Although none of these cases address antitrust injury directly,

Boris and Linseman were decided after Brunswick, so both courts

presumably satisfied themselves that such an injury existed.

Otherwise, the plaintiffs would have lacked standing to bring their

antitrust claims.

120 See Compl. ¥§ 34-35 (“The Rule is a per se violation of the

Sherman Act.... The Rule is a group boycott and a concerted

refusal to deal with individuals such as Clarett.”).

presented for decision here.”'?' Second, the Seventh Circuit

itself has been inconsistent in addressing the question of

whether an impact on consumers (in this case, the NFL teams)

via price or output is required to show antitrust injury.

Whether harm to consumers is the sine gua non

of antitrust injury is an issue over which there is

currently a split in this circuit. Some of our

cases hold that a plaintiff, to satisfy the antitrust

injury requirement, must demonstrate that the

challenged practice causing him harm also

harms consumers by reducing output or raising

prices. Others hold that application of the

antitrust laws does not depend in each particular

case upon the ultimate demonstrable consumer

effect.'”

Third, application of the “price or output” rule is

particularly questionable in the context of labor (as opposed to

: product) markets. As the just-quoted passage reveals, changes

in price or output are measures of the effect on consumers of a

questioned practice. But in a labor market — where the

consumers of labor are also usually the antitrust defendants — it

makes little sense to require harm to consumers as a

prerequisite for antitrust standing. '”*

21 Td. at 669 (emphasis added).

'22 Banks v. National C ollegiate Athletic Ass'n, 977 F.2d 1081,

1097 (7th Cir.1992) (Flaum, J., concurring in part and dissenting in

part) (citations and quotation marks omitted) (comparing Chicago

Prof'l Sports, 961 F.2d at 670 with Fishman v. Estate of Wirtz, 807

F.2d 520, 536 (7th Cir.1986)).

'23 See id. at 1098 (“[T]he market at issue here is the college

football labor market, and the NCAA member colleges are

consumers in that market. It would be counterintuitive to require

Banks to demonstrate that the no-draft and no-agent rules harm the

There is even less support for a strict “price or output”

rule outside of the Seventh Circuit. Indeed, none of the other

Courts of Appeals has ever endorsed such a test. Rather, the

Supreme Court as well as the lower courts have recognized that

while allegations of inflated prices or reduced services as a

result of a defendant’s anticompetitive conduct are among the

classic examples of antitrust injury,'”* they are but two of the

many ways in which a defendant’s anticompetitive conduct can

adversely affect the market. As the Ninth Circuit held in Les

Shockley Racing, Inc. v. National Hot Rod Association, a

violation of the Sherman Act is threatened “when the

restraining force of an agreement or other arrangement

affecting trade becomes unreasonably disruptive of market

functions such as price setting, resource allocation, market

entry, or output designation.” !”

In other words, an effect on price or output is a

sufficient but not a necessary element of antitrust injury.

Antitrust injury may arise from other anticompetitive effects,

including barriers to market entry. The Supreme Court has long

held that group boycotts are injurious to competition — and thus

may give rise to a plaintiff's antitrust injury — when those

barriers do not affect price or output, or even when they affect

price or output in a way that is beneficial to competition:

Group boycotts ... have long been held to be in

the forbidden category. They have not been

saved by allegations that they were reasonable

in the specific circumstances, nor by a failure to

colleges, the very entities that established those rules. | doubt very

strongly that the rule laid out in Chicago Professional Sports, to the

extent it is valid elsewhere, was intended to apply in this context.”)

(emphasis in original).

124 cee Associated Gen. C ontractors, 459 U.S. at 538, 103 S.Ct.

897.

25 884 F.2d 504, 508 (9th Cir.1989) (emphasis added).

show that they “fixed or regulated prices,

parcelled out or limited production, or brought

about a deterioration in quality.” Even when

they operated to lower prices or temporarily to

stimulate competition they were banned.'”°

Clarett alleges a group boycott excluding him, and all

others like him, from the market. His exclusion is an injury

flowing directly from the anticompetitive effect of the Rule.

b. Clarett Alleges a Group Boycott, Not

Merely That Another Player Has

Taken His Place

The NFL conveniently mischaracterizes Clarett’s claim

as “an allegation that the eligibility rule will enable another

player to secure a roster position and compensation that, in

plaintiff's view, should be his own.”!?” Clarett readily admits

that this would not be an antitrust injury.'° In fact, Clarett is

not complaining that he was replaced by other players as a

result of competition in a fair and open market. Rather, Clarett

126 Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 212,

79 S.Ct. 705, 3 L.Ed.2d 741 (1959) (quoting Fashion Originators’

Guild of Am. v. Federal Trade Comm’n, 312 U.S. 457, 466, 61

S.Ct. 703, 85 L.Ed. 949 (1941)).

'27 Memorandum in Support of the National Football League’s

Motion for Summary Judgment (Antitrust Injury) (“NFL Al

Mem.”) at 12.

128 cee Plaintiff's Memorandum in Opposition to Defendant

National Foctball League’s Motion for Summary Judgment

(Antitrust Injury) (“Clarett Al Mem.”) at 10 (“Defendant asserts

that the substitution of one supplier of services for another does not

constitute antitrust injury. We agree.”); see also NYNEX Corp. v.

Discon, Inc., 525 U.S. 128, 137, 119 S.Ct. 493, 142 L.Ed.2d 510

(1998) (“The freedom to switch suppliers lies close to the heart of

the competitive process that the antitrust laws seek to encourage.”).

alleges that he and other players made ineligible under the Rule

have been foreclosed from entering the market altogether.

“They are not losers in a competitive marketplace; they are not

even allowed in the game.”!””

In support of its argument, the NFL relies on cases

involving “supplier substitution” rather than exclusion from the

relevant market. As such, these cases are inapposite. The only

case among those cited by the NFL that binds this Court — the

Second Circuit’s decision in Balaklaw v. Lovell'*° — provides

the perfect example. In Balaklaw, plaintiff enjoyed a de facto

exclusive contract to provide anesthesiology services at

Cortland Memorial Hospital. That relationship ended when the

Hospital decided to solicit proposals for a written exclusive

contract. The Hospital reviewed nine proposals including one

from Dr. Balaklaw’s group and interviewed four of the

applicant groups, again including Dr. Balaklaw’s, before

ultimately awarding the exclusive contract to a group headed by

Dr. Delf King. Dr. Balaklaw sued the Hospital, alleging “that

the Hospital’s and Dr. King’s actions in entering into the

exclusive anesthesiology contract constituted a conspiracy to

engage in an illegal group boycott of, and a concerted refusal to

deal with, Dr. Balaklaw.”’*' The Second Circuit rejected this

claim, holding that “injuries resulting from competition alone

are not sufficient to constitute antitrust injuries.”'°* Dr.

Balaklaw’s injury, the court explained, stemmed not from a

group boycott, but from competition: “Dr. Balaklaw, like seven

of the other eight anesthesiology groups that submitted

proposals, simply failed to win the exclusive contract to

practice anesthesiology at CMH.... By closing its doors to Dr.

Balaklaw in favor of one of his competitors, CMH did nothing

129

130

Clarett Al Mem. at 10.

14 F.3d 793.

5) Tq at 796.

132 Tg. at 797.

a ee

to inflict an injury of the type the antitrust laws were intended

to prevent.”!”

In contrast to Balaklaw, the Rule precludes Clarett from

entering into “fair and vigorous competition.” Clarett does not

merely allege, as plaintiffs in Balaklaw did, that he was harmed

by competition. Rather, the harm to Clarett — his exclusion from

the League — flows from a harm fo competition.

The NFL’s reliance on two other cases — the Ninth

Circuit’s decision in Les Shockley Racing’ and the Sixth

Circuit’s decision in National Hockey League Players’

133 Tg at 801-02 (emphasis added) (footnote omitted). The NFL’s

reliance on Mathias v. Daily News, L.P., 152 F. Supp. 2d 465

(S.D.N.Y.2001), is also misplaced. That case involved a suit by

newspaper delivery firms against the Daily News, alleging that

when the newspaper started delivering its own papers it “attempted

to eliminate competition between itself and the Carriers.” [d. at

479. As in Balaklaw, the court held that defendant’s conduct was

merely ordinary competition:

[F]air and vigorous competition necessarily entails

success for some and loss or only marginal profit

for others — a natural result which never sits welF

with all of the parties who sacrifice and risk

equally to compete in the marketplace. But the

antitrust laws require competitors to show more

than individual loss or exclusion resulting from

fair and vigorous competition. Here, the Carriers

fail to allege any facts that point to a de:nonstrable

impact on the market. Therefore, because of their

failure to plead antitrust injury, the Carriers’

[antitrust] causes of action are dismissed.

Id. at 480 (emphasis added).

134 984 F.2d 504.

Association (“NHLPA”) v. Plymouth Whalers Hockey Club'*°

— is equally unavailing. Those cases deal with the merits of the

plaintiffs’ respective antitrust claims, not antitrust standing.

Indeed, the Les Shockley court even went out of its way to

explain that it was not addressing antitrust injury: “[W]hether

plaintiffs would meet the five-factor standing test of Associated

Gen. Contractors is irrelevant to this appeal.”'”°

To the extent that those two cases have any bearing on

Clarett’s case — because they concern the exclusion of petential

competitors in the sports context — they are easily distinguished.

The plaintiffs in Les Shockley Racing were owners and

operators of jet-powered trucks and motorcycles who staged

exhibition drag races. The National Hot Rod Association

(“NHRA”) banned exhibition drag racing of jet-powered

motorcycles and trucks on tracks under their sponsorship or

control. Plaintiffs claimed that this ban violated section 1 of the

Sherman Act by restraining trade in the market for “exhibition

drag racing services.”'*’ Plaintiffs further alleged that because

the NHRA controlled the majority of drag racing tracks,

plaintiffs were effectively blocked from the relevant market. In

affirming dismissal of the complaint, the court held that

plaintiffs had failed to allege that their exclusion resulted in a

“reduction of competition in the market in general” as opposed

to “injury to their own position as competitors in the

market.”!** The court went on to provide examples of what was

'39 395 F.3d 712 (6th Cir.2003).

'56 884 F.2d at 509 n. | (noting that the court was specifically

declining to address antitrust standing because “[b]y holding that

injury to competition was inadequately pleaded, the district court

determined that no violation of the antitrust law was stated. Thus,

no party could sue on the basis of the allegations in the amended

complaint.”) (emphasis added).

'57 984 F.2d at 508.

138 74

lacking:

Absent are factual allegations outlining the

effect of the NHRA’s ban on the price or

availability of exhibition drag racing services in

the United States; the allocation of work hours,

vehicle parts, and other resources crucial to the

provision of those services; the availability of

opportunity for entry into the market through

the use of jet-powered vehicles other than trucks

or motorcycles; or any other characteristic or

function of a competitive market.'”?

Clarett’s case is starkly different. Clarett defines the

relevant market as the NFL labor market for player services.

He specifically pleads a complete barrier to market entry. “The

Rule is harmful to competition as it provides for total exclusion

of players who have not completed three college seasons or are

not three years removed from high school graduation,

notwithstanding their ability to perform in the market and

compete for available positions in the league.”'” Clarett also

specifically alleges that “[t]here is no other league of

professional football that is comparable to the NFL.”!*

The market defined by Clarett is narrow — it is the

market for NFL player services. That is the only commodity

that Clarett has to sell and the only commodity the NFL seeks

to buy. Accordingly, the Rule harms both Clarett and

competition in the market for player services. A purchaser’s

bar on an entire class of sellers harms competition in the

absence of an alternative comparable buyer.'”” By contrast, the

139 14. at 509.

'40 Compl. ¢ 38.

14 1d. 4 30.

142 See infra Part IV.C.3.a.

market in Les Shockley was the market for all exhibition drag

racing. While jet-powered trucks and motorcycles were

excluded from that market, plaintiffs were not. They could have

competed by offering to exhibit other jet-powered vehicles or

non jet-powered trucks and motorcycles. Indeed, this point was

. explicitly acknowledged by the Les Shockley court. “[W]hen

the restraining force of the agreement or other arrangement

affecting trade becomes unreasonably disruptive of market

functions such as ... market entry ... a violation of the Sherman

Act [is] threatened.”!*? [FN143]

Similarly, plaintiffs’ claims in NHLPA were dismissed

because the plaintiffs did not identify a market in which

competition was impaired: “Failure to identify a relevant

market is a proper ground for dismissing a Sherman Act claim.

Appellees do not define a relevant market in_ their

complaint....”'“* Thus, the court ruled that plaintiffs had failed

to demonstrate a required e/ement of a section | claim: injury to

competition within a definable market. This failure was critical

because the ill-defined market made it impossible to gauge

whether other comparable leagues were unavailable to the

plaintiffs such that competition was harmed.

_ White at first glance the age-based ban on athletes at

issue in NHLPA may appear similar to the Rule, that facial

similarity is misleading. Because the NFL is not comparable to

other professional football leagues, the contours of the market

identified by Clarett are clear. In NHLPA, plaintiffs identified a

product market for amateur hockey, /.e., a market where the

Ontario Hockey League was the seller of amateur hockey to its

fans. Thus, the NHLPA plaintiffs alleged harm to the spectators

who were deprived of the opportunity to see the best players. It

143 984 F.2d at 508.

'44 325 F.3d at 719-20 (quotation marks and citations omiited)

(emphasis added).

is not surprising that <ye court found no anticompetitive effects

in that market from the alleged age-based eligibility restriction.

Such a rule could have affected the product of amateur hockey

only by diminishing the quality of play — a concern of no

relevance under the antitrust laws. 145 Clarett, by contrast, seeks

to sell his services in a /abor market. Thus, the harm he alleges

is to the market of players selling their services, not to the

market of consumers viewing the players. '*°

Intellective, Inc. v. Massachusetts Mutual Life

Insurance Co.'*’ demonstrates that unreasonable barriers to

market entry —i.e., group boycotts — are sufficient to establish

antitrust injury. In Intellective, a consortium of life insurers

known as the “Working Group” entered into an agreement to

withhold historical data (such as might be used in preparing a

comparative analysis of the insurers’ investment management

practices or asset allocation strategies) from third parties that

might wish to prepare such studies. 48 Intellective, a consulting

firm that was not affiliated with the Working Group, alleged

that this arrangement violated section 1 by erecting

“tremendous barriers of entry for anyone who wishes to

compete’ because ‘[a]ny investment performance survey which

does not include data from the Working Group companies will

be much less valuable than one that does.’”*

Defendants argued that Intellective had not sustained an

45 See id. at 720.

146 See infra Part IV.C.3.a.

147 190 F. Supp. 2d 600 (S.D.N.Y. 2002).

148 coe id. at 605 (“Once a company signs on to participate ... that

company can never give the same historical investment

performance data to any other consultant. In other words ... the

Working Group has locked up the information necessary to

perform competing studies.”).

'49 Td. at 606 (quoting the complaint; alteration in original).

antitrust injury because it was merely complaining that it had

lost its job preparing comparative studies to the Working

Groups’ preferred consultants.'*° The court concluded that,

“[t]o the extent Intellective claims injury relating to its loss of

the [ ] contract, defendants are correct that Intellective has not

pleaded an adequate antitrust injury. Intellective lost the [ ]

contract to Sagamore [a competing firm] through competition

between the two.”!*! But the court also found that the Working

Groups’ systematic exclusion of other firms — Intellective or

anyone else — from entering the market for producing

comparative life insurance investment reports constituted a

legitimate antitrust injury:

Defendants mistake Intellective’s primary

complaint. Although Intellective does complain

of the Insurance Company Defendants’ decision

not to award the contract to Intellective,

Intellective’s principal claim stems from the

Working Group’s attempt to monopolize the

information necessary to compete in the

relevant market. /ntellective adequately states

an antitrust injury in this regard. Intellective

alleges that it, and all others, are prevented from

competing in the relevant market by the

Working Group’s control of the data necessary

to perform a competing study. The prevention of

this type of marketwide competition is an

“injury of the type the antitrust laws were

designed to prevent.” Further, Intellective’s

own injury—its inability to compete in this

market—stems from defendants’ activities, as

required under Atlantic Richfield.'*

130 cee id. at 613.

15] Id

- - (emphases added) (footnote omitted) (quoting Brunswick,

Clarett has a demonstrable antitrust injury for precisely

the same reason: he alleges that the Rule prevents him, and all

others similarly situated, from competing in the relevant

market. And Clarett’s own injury — his inability to compete in

the market — stems from defendant’s activities.'*> Thus, he has

demonstrated antitrust injury.

_ hea The Rule Is an Unreasonable Restraint of

Trade

1. The Sherman Act Forbids

Unreasonable Restraints of Trade

429 U.S. at 489, 97 S.Ct. 690).

153 The NFL attempts to distinguish Intellective on two grounds,

neither of which is persuasive. First, it argues that Intellective

arose in the context of a motion to dismiss. While that is true, it in

no way affects the court’s analysis. In Intellective, the complaint

alleged that the Working Group withheld the relevant data from all

competitors, shutting them out of the market. In this case, it is

undisputed that the Rule prohibits underclassmen from entering the

market. The fact that the court in Intellective was required to

accept the complaint’. allegations is a distinction without a

difference. The court was not required, as the NFL suggests, to

accept as true plaintiff's legal conclusion that it had an antitrust

injury.

The NFL also perseverates over the fact that the exclusion

in Intellective was “permanent,” 190 F. Supp. 2d at 616, whereas

the Rule only forbids players from entering the NFL temporarily,

deferring their entry for a number of years. While this is true, that

fact played no role whatsoever in the court’s decision. In any case,

whether Clarett’s exclusion is temporary or permanent goes to the

extent of his antitrust injury, not the existence of that injury.

Section 1 of the Sherman Act prohibits “[e]very

contract, combination ... or conspiracy, in restraint of trade.”!™

Although the plain language of the Sherman Act would suggest

that every contract in restraint of trade violates the antitrust

laws, the Supreme Court has long held that the Sherman Act

prohibits only “unreasonable” restraints of trade.'°> Thus, in

order to prevail, “a plaintiff claiming a § 1 violation must first

establish a combination or some form of concerted action

between at least two legally distinct economic entities .... [I]t

must then proceed to demonstrate that the agreement

constituted an unreasonable restraint of trade ... .”!°° It is

undisputed that the Rule is the product of concerted action

amongst the NFL teams. The only issue that remains is whether

the Rule is an unreasonable restraint of trade.

To determine whether a restraint of trade is

unreasonable, most antitrust claims are analyzed according to

the “rule of reason.” This rule requires analysis of various

factors including information about the relevant business, its

condition before and after the restraint was imposed, and the

restraint’s history, nature, and effect.'®’ Some types of

restraints, however, have such predictable and pernicious

anticompetitive effect, and such limited potential for

procompetitive benefit, that they are deemed unlawful per se

and no further inquiry is required.'** Per se treatment is

1S USC. § 1.

15° See United States v. Joint-Traffic Ass’n, 171 U.S. 505, 19 S.Ct.

25, 43 L.Ed. 259 (1898); see also State Oil Co. v. Khan, 522 U.S.

3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997); Arizona v.

Maricopa County Med. Soc’y, 457 U.S. 332, 342-43, 102 S.Ct.

2466, 73 L.Ed.2d 48 (1982).

'°© Capital Imaging, 996 F.2d at 542.

57 See Maricopa County, 457 U.S. at 343 and n. 13, 102 S.Ct.

2466.

138 coe Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5, 78

S.Ct. 514, 2 L.Ed.2d 545 (1958).

appropriate “[o]nce experience with a particular kind of

restraint enables the Court to predict with confidence that the

rule of reason will condemn it.”!”? The per se rule is used when

courts are confronted with conduct that experience teaches is

overwhelmingly likely to be anticompetitive; in such cases

there is no need for a detailed market analysis.’ “Among the

practices which the courts have heretofore deemed to be

unlawful in and of themselves are [horizontal] price fixing,

division of markets, group boycotts, and tying

arrangements.”’°!

ye The Validity of the Rule Must Be

Analyzed Under the Rule of Reason

In NCAA v. Board of Regents, the Supreme Court

modified the per se approach for industries in which some

horizontal restraints are necessary. In such industries, even

conduct that is normally condemned as per se unreasonable

must be evaluated under the rule of reason in order to take into

account the realities of the industry’s regulatory landscape. As

one scholar explained,

” Maricopa County, 457 U.S. at 344, 102 S.Ct. 2466; see also

Broadcast Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1,

19-20, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979) (a per se rule is applied

when “the practice facially appears to be one that would always or

aieunet always tend to restrict competition and decrease output”).

6° See National Collegiate Athletic Ass’n (“NCAA”) v. Bd. of

Regents of University of Oklahoma, 468 U.S. 85, 104, 104 S.Ct.

2948, 82 L.Ed.2d 70 (1984) (“[w]hether the ultimate finding is the

product of a presumption or actual market analysis, the essential

inquiry remains the same—whether or not the challenged restraint

enhances competition. Under the Sherman Act the criterion to be

used in judging the validity of a restraint on trade is its impact on

competition.”).

*! Northern Pacific, 356 U.S. at 5, 78 S.Ct. 514 (citing cases).

[Some activities can only be carried out jointly.

Perhaps the leading example is league sports.

When a league of professional lacrosse teams is

formed, it would be pointless to declare their

cooperation illegal on the ground that there are

no other professional lacrosse teams.'™

Thus, in NCAA, the Court held that while

[hjorizontal price fixing and output limitation

are ordinarily condemned as a matter of law

under an “illegal per se” approach because the

probability that these practices are

anticompetitive is so high ... we have decided

that it would be inappropriate to apply a per se

rule to this case ... [because] this case involves

an industry in which horizontal restraints on

competition are essential if the product is to be

available at all.'®

Here, notwithstanding the fact that Clarett alleges that

the Rule constitutes a group boycott — conduct that historically

falls into the per se category'™ — the parties agree that the rule

'62 Robert H. Bork, The Antitrust Paradox 278 (1978) (quoted in

NCAA, 468 U.S. at 101, 104 S.Ct. 2948).

- NCAA, 468 U.S. at 100-01, 104 S.Ct. 2948; see also VKK Corp.

v. National Football League, 244 F.3d 114, 131 (2d Cir.2001)

(“While some restraints of trade are illegal per se, others, such as

trade restrictions by sports leagues, are analyzed to determine

whether the restriction’s ‘harm to competition outweighs any

procompetitive effects.’”) (quoting St. Louis Convention & Visitors

Comm'n v. National Football League, 154 F.3d 851, 861 (8th

Cir.1998)).

164 Even if this case did not arise in the sports context, the rule of

reason might have applied. The Supreme Court has signaled its

intent to move group boycotts off the short list of per se

ee ee

of reason applies because the challenged restraint arises in the

context of a sports league.

3. Application of the Rule of Reason

In evaluating a rule of reason case on summary

judgment, courts employ a three step burden-shifting test. —

Under this test plaintiff bears the initial burden

of showing that the challenged action has had an

actual adverse effect on competition as a whole

in the relevant market.... After the plaintiff

satisfies its threshold burden of proof under the

rule of reason, the burden shifts to the defendant

to offer evidence of the pro-competitive

“redeeming virtues” of their combination.

Assuming defendant comes forward with such

proof, the burden shifts back to plaintiff for it to

demonstrate that any legitimate collaborative

objectives proffered by defendant could have

been achieved by less restrictive alternatives,

that is, those that would be less prejudicial to

competition as a whole.'®

unreasonable conduct. Compare Klor’s, 359 U.S. at 212, 79 S.Ct.

705, with Federal Trade Comm'n v. Indiana Fed’n of Dentists, 476

U.S. 447, 458-59, 106 S.Ct. 2009, 90 L.Ed.2d 445 (1986), and

Northwest Wholesale Stationers, Inc. v. Pacific Stationery &

Printing Co., 472 U.S. 284, 294, 105 S.Ct. 2613, 86 L.Ed.2d 202

(1985). See generally Bogan v. Hodgkins, 166 F.3d 509, 515 (2d

Cir. 1999) (“Generally, group boycotts are illegal per se. Not all

such boycotts, however, are per se violations. The scope of the per

se rule against group boycotts is a recognized source of confusion

in antitrust law.”) (citations omitted).

vise Capital Imaging, 996 F.2d at 543 (citations omitted) (quoting 7

Areeda & Hovenkamp, Antitrust Law ¥ 1502).

a. The Rule Is a Naked Restraint of

Trade

Clarett alleges that the Rule constitutes a “group

boycott” that restrains trade in the relevant market (the NFL

player market) by denying market entry to certain sellers

(players less than three years removed from high school

graduation). This is precisely the sort of conduct that the

antitrust laws were designed to prevent: “whatever other

conduct the Acts may forbid, they certainly forbid al! restraints

of trade which were unlawful at common-law, and one of the

oldest and best established of these is a contract which

unreasonably forbids any one to practice his calling.”’®

Courts have found that similar entry barriers violate the

antitrust laws. In Denver Rockets v. All-Pro Management,

Inc.'*’ — the so-called “Spencer Haywood” case — the court

considered an NBA bylaw that restricted eligibility to players

who were at least four years removed from the date of their

high school graduation (or, in the case of players who did not

graduate high school, from the date of the remainder of their

class’s high school graduation). Holding that the four-year rule

constituted an unreasonable restraint of trade, the court

explained:

Application of the four-year college rule

constitutes a “primary” concerted refusal to deal

wherein the actors at one level of a trade pattern

(NBA team members) refuse to deal with an

actor at another level (those ineligible under the

NBA’s four-year college rule).

The harm resulting from a “primary” boycott

'© Gardella, 172 F.2d at 408.

'©7 395 F. Supp. 1049. si

such as this is threefold. First, the victim of the

boycott is injured by being excluded from the

market he seeks to enter. Second, competition in

the market in which the victim attempts to sell

his services is injured. Third, by pooling their

economic power, the individual members of the

NBA have, in effect, established their own

private government. Of course, this is true only

where the members of the combination possess

market power in a degree approaching a shared

monopoly. This is uncontested in the present

case.'

Similar age-based restrictions have been struck down in

the context of professional hockey’® and professional

football.'”° Although all of these cases were decided prior to

NCAA — and thus employed a per se analysis — their economic

analysis remains sound. Age-based eligibility restrictions in

professional sports are anticompetitive because they limit

competition in the player personnel market by excluding

sellers.

Nonetheless, the NFL argues that Clarett has failed to

168 Tq. at 1061.

109 See Linseman, 439 F.Supp. at 1320 (preliminarily enjoining a

rule declaring players younger than twenty ineligible for hockey

league draft because it was an illegal “group boycott, or a

concerted refusal to deal, [that] has been long and consistently

classified as a per se violation of the Sherman Act.”).

170 See Boris, 1984 WL 894, at *1 (preliminarily enjoining, as an

illegal group boycott, a rule providing that “[nJo person shall be

eligible to play ... unless (1) all college football eligibility of such

player has expired, or (2) at least five (5) years shall have elapsed

since the player first entered or attended a recognized junior

college, college or university or (3) such player received a diploma

from a recognized college or university”).

establish a prima facie claim under section 1 because he has not

“establish[ed] the contours of the relevant market.”'”! - This

argument fails for two reasons, one factual and one legal. First,

Clarett has sufficiently defined the relevant market. In his

complaint, Clarett alleges that “[t]he NFL is a distinct market

for professional football for which there are no reasonable

substitutes in the United States.”'”? The relevant market is

therefore the market for NFL players.'” That the League has

exclusive market power in this arena is obvious; the very fact

that it can establish a Rule that excludes players from the

market altogether demonstrates its market domination.

Second, as a legal matter, the NFL’s argument that

Clarett has failed to define the relevant market “misapprehends

the purpose in antitrust law of market definition, which is not

an end unto itself but rather exists to illuminate a practice’s

effect on competition.” As the Tenth Circuit has explained,

'7) See NFL Mem. at 20 (quoting Union Carbide Corp. v. Montell

N.V., 28 F. Supp. 2d 833, 840 (S.D.N.Y.1998)).

bi Compl. ¥ 8.

'3 The League’s suggestion that one of the other professional

football leagues in North America is a fair substitute for the NFL

cannot be taken seriously. “[M|Jarket definition is guided by an

analysis of the interchangeability of use or the cross-elasticity of

demand for potential substitute products.” Todd v. Exxon Corp.,

275 F.3d 191, 201 (2d Cir.2001) (quotation marks and citations

omitted). In the case of a labor market or buyer-side conspiracy,

these factors are reversed. “In such a case, the market is not the

market of competing sellers but of competing buyers. This market

is comprised of buyers who are seen by sellers as being reasonably

good substitutes.” Jd. at 202 (quotation marks and citations

omitted). No elaborate factual record need be developed to

recognize that no football player would see the Arena League or

the Canadian League as a reasonably good substitute for the NFL.

'4 Law v. Nat'l Collegiate Athletic Ass'n, 134 F.3d 1010, 1020

(10th Cir.1998).

“A plaintiff may establish anticompetitive effect indirectly by

proving that the defendant possessed the requisite market power

within a defined market or directly by showing actual

anticompetitive effects ... .”'”°

“To avoid examining the relevant market, market

power, and anticompetitive effect in all cases in which conduct

does not clearly fit within a per se category, the Supreme Court

has sanctioned an intermediate inquiry, known as ‘quick look,’

if the conduct at issue is a ‘naked restriction.””"”° Such a

“quick look” analysis, as the Supreme Court has recently

explained, is appropriate where “the great likelihood of

anticompetitive effects can easily be ascertained,” and “an

observer with even a rudimentary understanding of economics

could conclude that the arrangements in question would have

175 1d. at 1019.

sit Bogan, 166 F.3d at 514 n. 6.; see also Capital Imaging, 996

F.2d at 546 (holding that “the plaintiff may satisfy [its] burden

without detailed market analysis by offering proof of actual

detrimental effects” to demonstrate “that the defendants’ conduct

or policy has had a substantially harmful effect on competition”);

Law, 134 F.3d at 1020 (“[W]here a practice has obvious

anticompetitive effects ... there is no need to prove that the

defendant possesses market power. Rather, the court is justified in

proceeding directly to the question of whether the procompetitive

justifications advanced for the restraint outweigh the

anticompetitive effects under a ‘quick look’ rule of reason.”); see

generally California Dental Ass’n v. Federal Trade Comm'n, 526

U.S. 756, 779, 119 S.Ct. 1604, 143 L.Ed.2d 935 (1999) (“The truth

is that our categories of analysis of anticompetitive effect are less

fixed than terms like ‘per se,’ ‘quick look,’ and ‘rule of reason’

tend to make them appear. We have recognized, for example, that

there is often no bright line separating per se from Rule of Reason

analysis, since considerable inquiry into market conditions may be

required before the application of any so-called per se

condemnation is justified.”) (quotation marks omitted).

99177

an anticompetitive effect.

The Rule is the perfect example of a policy that is

appropriately analyzed under the “quick look” standard because

its anticompetitive effects are so obvious. Indeed, one can

scarcely think of a more blatantly anticompetitive policy than

one that excludes certain competitors from the market

altogether. Because the Rule has the actual anticompetitive

effect of excluding players — including Clarett — from the NFL,

it is a naked restriction.'”* Clarett has therefore established a

prima facie violation of section 1 of the Sherman Act.

b. The Rule Has No Legitimate

Procompetitive Justification

Because Clarett has established the anticompetitive

effect of the Rule, the burden shifts to the NFL to offer a

procompetitive justification.’” | The NFL offers four

justifications: .

The purposes of the eligibility rule include [1]

protecting younger and/or less experienced

players — that is, players who are less mature

physically and _ psychologically - from

heightened risks of injury in NFL games; [2]

protecting the NFL’s entertainment product

from the adverse consequences associated with

such injuries; [3] protecting the NFL clubs from

177

178

California Dental, 526 U.S. at 770, 119 S.Ct. 1604.

See 13 Areeda & Hovenkamp, Antitrust Law J 2201a (“A

concerted refusal to deal is ‘naked’ if its objectively intended

purpose is to keep the target’s output off the market....”).

'” See id. at 788, 119 S.Ct. 1604 (Breyer, J., concurring in part

and dissenting in part) (“In the usual Sherman Act § | case, the

defendant bears the burden of establishing a procompetitive

justification.”).

the costs and potential liability entailed by such

injuries; and [4] protecting from injury and self-

abuse other adolescents who would over-train —

and use steroids — in the misguided hope of

developing prematurely the strength and speed

required to play in the NFL.'®°

While these may be reasonable concerns, none are

reasonable justifications under the antitrust laws.'®!

The NFL’s first and fourth justifications — the desire to

protect younger athletes from injury or over-training — can be

dismissed out of hand. The antitrust laws require a

procompetitive justification in the face of a demonstrably

anticompetitive rule.'* The NFL’s concern for the health of

younger players is laudable, but it has nothing to do with

promoting competition.

The NFL’s second and third justifications — the desire to

protect the League and its teams from the costs associated with

180 NFL Mem. at 4.

'8! Clarett argues that the real motivation for the Rule is that it

creates a free farm system — a risk-free laboratory for the

development of younger players. See, e.g., Clarett Al Mem. at 3

(“T]he teams’ agreement perpetuates and maintains the NCAA as

its free minor league system.”). When a collegiate player is injured

or simply fizzles out, Clarett charges, it happens on someone else’s

(usually the player’s) dime. Whether Clarett is right or wrong in

his speculation is irrelevant to deciding whether the Rule violates

the antitrust laws. The question here is whether the party who has

restrained competition can offer a legitimate procompetitive

justification for that action.

182 coe Law, 134 F.3d at 1021 (“Justifications offered under the

rule of reason may be considered only to the extent that they tend

to show that, on balance, ‘the challenged restraint enhances

competition.’”) (quoting NCAA, 468 U.S. at 104, 104 S.Ct. 2948).

injuries — are, for two reasons, also ineffective. First, the

League may not justify the anticompetitive effects of a policy

by arguing that it has procompetitive effects in a different

market.'® Yet this is precisely what the NFL is advocating.

The League argues that the Rule, by allegedly limiting the

occurrence of player injuries, maintains the high quality of its

“entertainment product,” and thus presumably enables the

League to better compete with other providers of sports

entertainment such as other professional sports leagues or

amateur football. The Rule, according to the NFL, thus limits

competition in the player personnel market but enhances

competition in the market for sports entertainment.'™* Even if it

could be said with certainty that the Rule is procompetitive in

this sense — and the League has certainly submitted no evidence

to that effect — the League may not enact a policy that,

effectively, “determine[s] the respective values of competition

in various sectors of the economy.”!®

183 See United States v. Topco Assocs., Inc., 405 U.S. 596, 610, 92

S.Ct. 1126, 31 L.Ed.2d 515 (1972) (“[T]he freedom guaranteed

each and every business, no matter how small, is the freedom to

compete-to assert with vigor, imagination, devotion, and ingenuity

whatever economic muscle it can muster. Implicit in such freedom

is the notion that it cannot be foreclosed with respect to one sector

of the economy because certain private citizens or groups believe

that such foreclosure might promote greater competition in a more

important sector of the economy.”).

184 The NFL’s reference to “protecting the NFL’s entertainment

product” is somewhat obscure. The NFL never explains how

protecting its entertainment product enhances competition.

'8 Topco, 405 U.S. at 610-11, 92 S.Ct. 1126. A fifth potential

justification for the Rule — alluded to only obliquely in the

League’s papers — is that the Rule, by excluding the most talented

college players from the NFL, “sustains the NCAA’s ability to

compete in the entertainment market.” Reply Memorandum in

Support of the National Football League’s Motion for Summary

Second, the NFL’s desire to keep its costs down is not a

legitimate procompetitive justification.’ The fact that the

League and its teams will save money by excluding players

does not justify that exclusion. Indeed, the vast majority of

anticompetitive policies are instituted because they will be -

profitable to the violators. As one scholar explains,

The exercise of market power by a group of

buyers virtually always results in lower costs to

the buyers — a consequence which arguably is

beneficial to the members of the industry and

ultimately their consumers. If holding down

costs by the exercise of market power over

suppliers, rather than just by increased

efficiency, is a procompetitive effect justifying

joint conduct, then section 1 can never apply to

input markets or buyer cartels. That is not and

cannot be the law.'®’ :

Because the League has failed to offer any legitimate

procompetitive justifications for the Rule, Clarett must

prevail.'*® There is no need to proceed to trial or engage in

Judgment (Antitrust Injury) at 7, n.7. That justification fails for the

same reason just discussed, namely, that it sacrifices competition in

one market for the sake of increased competition in another.

186 cee Law, 134 F.3d at 1022 (“[C]ost-cutting by itself is not a

valid procompetitive justification.”).

wid Gary R. Roberts, The NCAA, Antitrust, and Consumer Welfare,

70 Tul. L.Rev. 2631, 2643 (1996). i

188 Soe Chicago Prof’! Sports, 961 F.2d at 674 (holding that when

a plaintiff has demonstrated a naked restraint on trade, “[uJnless

there are sound justifications, the court condemns the practice

without ado.”); see generally Phillip Areeda, The “Rule of

Reason” in Antitrust Analysis: General Issues 37-38 (1981)

(“[T]he rule of reason can sometimes be applied in the twinkling of

an eye.”) (quoted in NCAA, 468 U.S. at 110 n. 39, 104 S.Ct. 2948).

fact-finding because the League has failed, as a matter of law,

to offer any procompetitive justifications for the Rule.

Accordingly, no jury is required to find that the anticompetitive

effects of the Rule outweigh its procompetitive benefits.'®

c. Less Restrictive Alternatives to the

Rule Exist

Nonetheless, even if a procompetitive justification for

the Rule existed, summary judgment for Clarett would be

appropriate because an alternative to the Rule exists that is less

prejudicial to competition. The antitrust laws do not tolerate a

policy that restrains trade — even if there is some

procompetitive benefit — when a policy that results in less

prejudice to competition would be equally effective.'”

All of the League’s justifications for the Rule boil down

to the same basic concern: younger players are not physically or

mentally ready to play in the NFL. But as the NFL’s own

affiant concedes, the “timeframe” for a player’s physical and

psychological maturation “varies from _ individual to

189 See, e.g., Law, 134 F.3d 1010 (affirming grant of summary

judgment to antitrust plaintiff); PSC Inc. v. Symbol Tech., Inc., 26

F. Supp. 2d 505 (W.D.N.Y.1998) (granting summary judgment to

antitrust plaintiff); cf Capital Imaging, 996 F.2d 537 (affirming

grant of summary judgment to defendant after engaging in rule of

reason analysis); see generally Barry v. Blue Cross of Cal., 805

F.2d 866, 871 (9th Cir.1986) (“Occasionally, conduct is so clearly

either reasonable or unreasonable that a court can dispose of the

issue On summary judgment.”); PSC, 26 F. Supp. 2d at 511

(“Application of the rule of reason is ‘often erroneously assumed

to require refined fact finding and balancing[,] ... [and] some rule-

of-reason cases can be disposed of merely on the basis of the

parties’ arguments and, more often, on the basis of a limited

summary judgment record.’’’) (quoting 7 Areeda & Hovenkamp,

Antitrust Law § 1508) (alteration in original).

10 See Capital Imaging, 996 F.2d at 543.

- a

individual.”'”’ That being so, age is obviously a poor proxy

for NFL-readiness, as is a restriction based solely on height or

weight.'”* Medical examinations and tests are available to

measure an individual player’s maturity.'"? The League could

easily use those tests to screen out players who are not prepared

to play in the NFL. And while Dr. Metz! asserts that such tests

are “intrusive,”'™ there is little doubt that potential draftees

would voluntarily submit to testing in order to compete for a

spot in the League.'”°

By requiring draft prospects to submit to these

examinations, the League could provide valuable information

about player maturity to its teams and allow them to decide

whether a prospect is worth selecting. In such a scenario, no

player would be automatically excluded from the market and

each team could decide what level of risk it is willing to

tolerate. The fact that there is a less restrictive alternative only

underscores that there is no procompetitive justification for the

Rule, and that it violates the antitrust laws.

V. CONCLUSION

For the reasons just explained, Clarett’s motion for

summary judgment is granted and the NFL’s motions are

'! Metzl Decl. 4 6.

12 See id. | 12.

193 See id. 4 17.

1 See id.

195 Indeed, it has been noted that potential draft picks are already

subjected to extensive physical, medical and psychological testing.

Each of the players that attend the NFL’s annual draft combines —

where prospective draftees are evaluated by the teams — are

subjected to a battery of physical examinations, psychological

profiles, and interviews. See Vic Carucci, Combine Still Critical to

Evaluating Talent (Feb. 18, 2003), at

http://www.nfl.com/draft/story/6197027.

denied. Because the Rule violates the antitrust laws, it cannot

preclude Clarett’s eligibility for the 2004 NFL draft.

Accordingly, it is hereby ORDERED that Clarett is eligible to

participate in the 2004 NFL draft. Clarett also requests damages

as a result of his exclusion from the 2003 NFL draft. Because

the parties have not yet addressed this issue, it is unclear

whether there are material issues of fact with respect to

damages. A conference is scheduled in Courtroom 15C on

February 12, 2004 at 10:00 a.m.

SO ORDERED:

/s/

Shira A. Scheindlin

United States District Judge

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term, 2003

Argued: April 19, 2004 Decided: May 24, 2004

Docket No. 04-0943

MAURICE CLARETT,

Plaintiff-Appellee,

=Vv.-

NATIONAL FOOTBALL LEAGUE,

Defendant-Appellant.

Before:

SACK, SOTOMAYOR, Circuit Judges, and KAPLAN,

District Judge.*

* The Honorable Lewis A. Kaplan, Judge of the United

States District Court for the Southern District of New York,

sitting by designation.

Defendant-appellant National Football League (“NFL”)

appeals from a judgment of the United States District Court of

the Southern District of New York (Scheindlin, J.) granting

summary judgment in favor of plaintiff-appellee Maurice

Clarett on his claim that the NFL’s eligibility rules, which

prevent him from entering the NFL draft because he is not more

than three football seasons removed from high school, violate

the antitrust laws. We hold that the challenged rules are

shielded from the antitrust laws by the non-statutory labor

exemption and on that basis REVERSE and REMAND for the

district court to enter judgment in favor of defendant. As the

NFL is entitled to summary judgment, we further VACATE the

district court’s order declaring Clarett eligible to participate in

the 2004 NFL draft that was stayed pending appeal.

REVERSED, in part, VACATED, in part, and

REMANDED.

SOTOMAYOR, Circuit Judge:

Defendant-appellant National Football League (“NFL”

or “the League”) appeals from a judgment of the United States

District Court for the Southern District of New York

(Scheindlin, J.) ordering plaintiff-appellee Maurice Clarett

(“Clarett”) eligible to enter this year’s NFL draft on the ground

that the NFL’s eligibility rules requiring Clarett to wait at least

three full football seasons after his high school graduation

before entering the draft violate antitrust laws. In reaching its

conclusion, the district court held, inter alia, that the eligibility

rules are not immune from antitrust scrutiny under the non-

statutory labor exemption.'”° We disagree and reverse.

BACKGROUND

Clarett, former running back for Ohio State University

(“OSU”) and Big Ten Freshman of the Year, is an

accomplished and talented amateur football player.'”” After

gaining national attention as a high school player, Clarett

became the first college freshman since 1943 to open as a

starter at the position of running back for OSU. He led that

team through an undefeated season, even scoring the winning

touchdown in a double-overtime victory in the 2003 Fiesta

Bowl to claim the national championship.'” Prior to the start

of his second college season, however, Clarett was suspended

from college play by OSU for reasons widely reported but not

relevant here.'” Forced to sit out his entire sopnomore season,

Clarett is now interested in turning professional by entering the

NFL draft. Clarett is precluded from so doing, however, under

the NFL’s current rules governing draft eligibility. —

Founded in 1920, the NFL today is comprised of 32

member clubs and is by far the most successful! professional

'%6 Because we find that the eligibility rules are immune from

antitrust scrutiny under the non-statutory labor exemption, we do

not express an opinion on the district court’s legai conclusions that

Clarett alleged a sufficient antitrust injury to state a claim or that

the eligibility rules constitute an unreasonable restraint of trade in

violation of the antitrust laws.

'7 These facts, except where otherwise noted, are undisputed and

taken from the opinion of the district court. See Clarett v. Nat'l

Football League, 306 F.Supp.2d 379, 382 (S.D.N.Y. 2004).

198 See Joe Drape, Extra! Extra! It’s Ohio State, N.Y. Times,

January 4, 2003, at D1.

1% See Mike Freeman, Buckeyes Suspend Clarett For Year, N.Y.

Times, Sept. 11, 2003, at D1.

football league in North America.”” Because of the League’s

fiscal success and tremendous public following, a career as an

NFL player “represents an unparalleled opportunity for an

aspiring football player in terms of salary, publicity,

endorsement opportunities, and level of competition.” Clarett,

306 F. Supp. 2d at 384. But since 1925, when Harold “Red”

Grange provoked controversy by leaving college to join the

Chicago Bears,””' the NFL has required aspiring professional

football players to wait a sufficient period of time after

graduating high school to accommodate and encourage college

attendance before entering the NFL draft. For much of the

League’s history, therefore, a player, irrespective of whether he

actually attended college or not, was barred from entering the

draft until he was at least four football seasons removed from

high school. The eligibility rules were relaxed in 1990,

however, to permit a player to enter the draft three full seasons

after that player’s high school graduation.

Clarett “graduated high school on December 11, 2001,

two-thirds of the way through the 2001 NFL season” and is a

season shy of the three necéssary to qualify under the draft’s

eligibility rules. Clarett Decl. at § 6. Unwilling to forego the

prospect of a year of lucrative professional play or run the risk

of a career-compromising injury were his entry into the draft

delayed until next year, Clarett filed this suit alleging that the

NFL’s draft eligibility rules are an unreasonable restraint of

trade in violation of Section 1 of the Sherman Act, 15 U.S.C. §

1, and Section 4 of the Clayton Act, 15 U.S.C. § 15.

20 See generally, United States Football League v. Nat’l Football

League, 842 F.2d 1335, 1343-45 (2d Cir. 1988) (recounting history

of professional football leagues in the United States).

70! See Gerald Eskenazi, Red Grange, Football Hero of 1920's,

Dead at 87, N.Y. Times, Jan. 29, 1991, at BS.

Because the major source of the parties’ factual disputes

is the relationship between the challenged eligibility rules and

the current collective bargaining agreement governing the terms

and conditions of employment for NFL players, some

elaboration on both the collective bargaining agreement and the

eligibility rules is warranted. The current collective bargaining

agreement between the NFL and its players union was

negotiated between the NFL Management Council

(“NFLMC”), which is the NFL member clubs’ multi-employer

bargaining unit, and the NFL Players Association (“NFLPA”),

the NFL players’ exclusive bargaining representative. This

agreement became effective in 1993 and governs through 2007.

Despite the collective bargaining § agreement’s

comprehensiveness with respect to, inter alia, the manner in

which the NFL clubs select rookies through the draft and the

scheme by which rookie compensation is determined, the

eligibility rules for the draft do not appear in the agreement.

At the time the collective bargaining agreement became

effective, the eligibility rules appeared in the NFL Constitution

and Bylaws, which had last been amended in 1992.7”

Specifically, Article XII of the Bylaws (“Article XII”), entitled

“Eligibility of Players,” prohibited member clubs from

selecting any college football player through the draft process

who had not first exhausted all college football eligibility,

graduated from college, or been out of high school for five

football seasons. Clubs were further barred from drafting any

person who either did not attend college, or attended college

but did not play football, unless that person had been out of

202 ‘after the Constitution and Bylaws were amended in 1992, a

revised copy was sent by the NFL Commissioner to all club

owners, presidents and general managers. A memorandum from

the Commissioner that accompanied the revised Constitution and

Bylaws noted that changes had been made to the eligibility rules.

high school for four football seasons. Article XII, however,

also included an exception that permitted clubs to draft players

who had received “Special Eligibility” from the NFL

Commissioner. In order to qualify for such special eligibility, a

player was required to submit an application before January 6

of the year that he wished to enter the draft and “at least three

NFL seasons must have elapsed since the player was graduated

from high school.” The Commissioner’s practice apparently

was, and still is, to grant such an application so long as three

full football seasons have passed since a player’s high school

graduation.“ Appellant’s Brief, at 7 n. 3.

Although the eligibility rules do not appear in the text of

the collective bargaining agreement, the NFL Constitution and

Bylaws that at the time of the agreement’s adoption contained

the eligibility rules are mentioned in three separate provisions

relevant to our discussion. First, in Article III, Section 1 (Scope

of Agreement), the collective bargaining agreement states:

This Agreement represents the complete

understanding of the parties as to ali subjects

covered herein, and there will be no change in

the terms and conditions of this Agreement

without mutual consent ... . [T]he NFLPA and

the Management Council waive any rights to

bargain with one another concerning any subject

covered or not covered in this Agreement for

the duration of this Agreement, including the

provisions of the NFL Constitution and Bylaws;

203 ‘At oral argument, counsel for Clarett clarified that his challenge

is not limited to the “Special Eligibility” rule, as his papers on

appeal might suggest, but extends to any and all of the eligibility

rules that would keep Clarett from entering the NFL draft this year.

We refer to these rules collectively as “the eligibility rules.”

provided, however, that if any proposed change

in the NFL Constitution and Bylaws during the

term of this Agreement could significantly

aifect the terms and conditions of employment

of NFL players, then the [NFLMC] will give the

NFLPA notice of and negotiate the proposed

change in good faith.

(emphasis added). Second, Article IV, Section 2 (No

Suit) provides generally that “neither [the NFLPA] nor any of

its members” will sue or support a suit “relating to the presently

existing provisions of the Constitution and Bylaws of the NFL_

as they are currently operative and administered.” Third, Article

1X, Section 1 (Non-Injury Grievance) makes “[a]ny dispute ...

involving the interpretation of, application of, or compliance

with, ... any applicable provision of the NFL Constitution and

Bylaws pertaining to terms and conditions of employment of

NFL players” subject to the grievance procedures afforded

under the collective bargaining agreement.

Before the collective bargaining agreement became

effective, a copy of the Constitution and Bylaws, as amended in

1992, was provided by the NFL to the NFLPA along with a

letter, dated May 6, 1993, that “confirm[ed] that the attached

documents are the presently existing provisions of the

Constitution and Bylaws of the NFL referenced in Article IV,

Section 2, of the Collective Bargaining Agreement.” The May

6 letter was signed by representatives of the NFL and the

NFLPA. The only other evidence presented to the district court

by the NFL concerning the negotiation of the collective

bargaining agreement were the two declarations of Peter

Ruocco, Senior Vice President of Labor Relations at the

NFLMC. In the second declaration, Ruocco attests that

“[{djuring the course of collective bargaining that led to the

[collective bargaining agreement], the [challenged] eligibility

rule itself was the subject of collective bargaining.” Ruocco

~ Decl. at { 8.

In 2003, ten years into the life of the collective

bargaining agreement, Article XII was amended. Although the

substance of most of the eligibility rules was retained, the

“Special Eligibility” provision was removed and substituted

with the following”:

If four seasons have not elapsed since the player

discontinued high school, he is ineligible for

selection, but may apply to the Commissioner

for special eligibility.

The Bylaws then refer to a separate memorandum

issued by the Commissioner on February 16, 1990 — three years

before the current collective bargaining agreement became

effective —pursuant to his authority under the Bylaws to

establish necessary policies and procedures. That memorandum

states that “[a]pplications for special eligibility for the 1990

draft will be accepted only from college players as to whom

three full college seasons have elapsed since their high school

graduation.” (emphasis added).’” It is this version of the

7 Although Article III, Section 1 of the collective bargaining

agreement obligates the NFL to notify the players union of, and to

bargain over, any change to the Bylaws that “could signifieantly

affect the terms and conditions” of players’ employment, the

record is silent as to whether the NFL or the players union

considered the changes to Article XII significant, whether the NFL

notified the players union of these changes, or whether the changes

were bargained over.

205 Whereas the pre-2003 version of the Constitution and Bylaws

authorized special eligibility for players after the passing of “three

NFL seasons,” the current eligibility rules as established by the

Bylaws and the Commissioner’s memorandum require that “three

- 68

eligibility rules that the NFL relies upon in refusing Clarett

special eligibility for this year’s draft, and it is this version of

the eligibility rules that Clarett seeks to invalidate.

After Clarett filed this suit in September 2003, the

parties conducted limited discovery and thereafter moved for

summary judgment. Clarett sought summary judgment on the

merits of his antitrust claim. The NFL asserted that Clarett

lacked “antitrust standing” and that, as a matter of law, the

eligibility rules were immune from antitrust attack by virtue of

the non-statutory labor exemption. On February 5, 2004, the

district court granted summary judgment in favor of Clarett and

ordered him eligible to.enter this year’s draft. Clarett, 306 F.

Supp. 2d at 410-11. First, relying on the test articulated by the

Eighth Circuit in Mackey v. National Football League, 543

F.2d 606 (8th Cir. 1976), the district court rejected the NFL’s

argument that the antitrust laws are inapplicable to the

eligibility rules because they fall within the non-statutory labor

exemption to the antitrust laws. Clarett, 306 F. Supp. 2d at

397. Specifically, the district court held that the exemption

does not apply because the eligibility rules: 1) are not

mandatory subjects of collective bargaining, 2) affect only

“complete strangers to the bargaining relationship,” and 3) were

not shown to be the product of arm’s-length negotiations

between the NFL and its players union. Jd. at 393-97.

Second, the district court ruled against the NFL on its

contention that Clarett lacked standing because he had not

demonstrated a sufficient “antitrust injury” to maintain this suit,

holding that the “inability to compete in the market” for NFL

full college seasons” have elapsed. Clarett is neither three NFL

seasons nor three college seasons out of high school. Because the

difference is immaterial for our purposes, we use the less specific

“three football seasons” when referring to the amount of time after

graduating high school a player must wait before entering the draft.

players’ services is sufficient injury for antitrust purposes. /d.

at 403.

Third, on the merits of Clarett’s antitrust claim, the

district court found that the eligibility rules were so “blatantly

anticompetitive” that only a “quick look” at the NFL’s

procompetitive justifications was necessary to reach the

conclusion that the eligibility rules were unlawful under the

antitrust laws. Jd. at 408. The NFL had argued that because the

eligibility rules prevent less physically and emotionally mature

players from entering the league, they justify any incidental

anticompetitive effect on the market for NFL players. Jd. In so

doing, according to the NFL, the eligibility rules guard against

less-prepared and younger players entering the League and

risking injury to themselves, prevent the sport from being

devalued by the higher number of injuries to those young

players, protect its member clubs from having to bear the costs

of such injuries, and discourage aspiring amateur football

players from enhancing their physical condition through

unhealthy methods. /d. at 408-09. The district court held that

all of these justifications were inadequate as a matter of law,

concluding that the NFL’s purported concerns could be

addressed through less restrictive but equally effective means.

Id. at 410. Finding that the eligibility rules violated the

antitrust laws, the district court entered judgment in favor of

Clarett, and, recognizing that this year’s draft was then just over

two months away, issued an order deeming Clarett eligible to

participate in the draft.

The NFL subsequently moved for a stay pending appeal,

which the district court denied. Clarett v. Nat’l Football

League, 306 F. Supp. 2d 411 (S.D.N.Y.2004). After filing a

notice of appeal, the NFL petitioned to have the appeal heard

on an expedited basis and again moved to stay the district

court’s order pending appeal. On March 30, 2004, we agreed to

hear the appeal on an expedited basis and set a substantially

compressed briefing schedule. Following oral argument on

April 19, we granted the NFL’s motion to stay the district

court’s order, citing the NFL’s “likelihood of success on the

merits” and noting that the resulting harm to Clarett was

mitigated by the NFL’s promise to “hold a supplemental draft

for [Clarett] and all others similarly situated” were the district

court’s judgment affirmed. Order of April 19, 2004. Clarett

thereafter made successive applications to two Justices of the

Supreme Court to lift this Court’s stay order. Both applications

were denied. Clarett did not participate in the NFL draft held

on April 24 and 25, 2004.

DISCUSSION

Clarett argues that the NFL clubs are horizontal

competitors for the labor of professional football players and

thus may not agree that a player will be hired only after three

full football seasons have elapsed following that player’s high

school graduation. That characterization, however, neglects

that the labor market for NFL players is organized around a

collective bargaining relationship that is provided for and

promoted by federal labor law, and that the NFL clubs, as a

multi-employer bargaining unit, can act jointly in setting the

terms and conditions of players’ employment and the rules of

the sport without risking antitrust liability. For those reasons,

the NFL argues that federal labor law favoring and governing

the collective bargaining process precludes the application of

the antitrust laws to its eligibility rules. We agree.

The district court’s denial of the NFL’s motion for

summary judgment is reviewed de novo, and all factual

inferences are drawn in favor of Clarett. See Amnesty America

v. Town of West Hartford, 361 F.3d 113, 122 (2d Cir.2004).

Although “[t]he interaction of the [antitrust laws] and

federal labor legislation is an area of law marked more by

controversy than by clarity,” Wood v. Nat’l Basketball Ass'n,

809 F.2d 954, 959 (2d Cir.1987) (citing R. Gorman, Labor

Law, Unionization and Collective Bargaining 631-35 (1976)), |

it has long been recognized that in order to accommodate the ,

collective bargaining process, certain concerted activity among ;

and between labor and employers must be held to be beyond the |

reach of the antitrust laws. See United States v. Hutcheson, 312

U.S. 219, 61 S.Ct. 463, 85 L.Ed. 788 (1941); Apex Hosiery Co.

v. Leader, 310 U.S. 469, 60 S.Ct. 982, 84 L.Ed. 1311 (1940).

Courts, therefore, have carved out two categories of labor

exemptions to the antitrust laws: the so-called statutory and

non-statutory exemptions.” We deal here only with the non-

statutory exemption.

The non-statutory exemption has been inferred “from

federal labor statutes, which set forth a national labor policy

favoring free and private collective bargaining; which require

good-faith bargaining over wages, hours, and working

conditions; and which delegate related rulemaking and

206 The statutory exemption, so named because it is derived from

the texts of the Clayton Act, 15 U.S.C. § 17, 29 U.S.C. § 52, and

the Norris-LaGuardia Act, 29 U.S.C. § 101 et seq., shields from

the antitrust laws certain unilateral conduct of labor groups such as

boycotts and picketing. See H.A. Artists & Assocs., Inc. v. Actors’

Equity Ass'n, 451 U.S. 704, 714-15, 101 S.Ct. 2102, 68 L. Ed. 2d

558 (1981). Because the statutory exemption does not provide any

protection for “concerted action or agreements between unions and

nonlabor parties,” Connell Constr. Co. v. Plumbers & Steamfitters

Local No. 100, 421 U.S. 616, 622, 95 S.Ct. 1830, 44 L.Ed.2d 418

(1975), the NFL does not rely on the statutory exemption in

arguing that its eligibility rules are immune from the antitrust laws.

interpretive authority to the National Labor Relations Board.”

Brown v. Pro Football, Inc., 518 U.S. 231 , 236, 116 S.Ct. 2116,

135 L. Ed. 2d 521 (1996) (internal citations omitted). The

exemption exists not only to prevent the courts from usurping

the NLRB’s function of “determin{ing], in the area of industrial

conflict, what is or is not a ‘reasonable’ practice,” but also “to

allow meaningful collective bargaining to take place” by

protecting “some restraints on competition imposed through the

bargaining process” from antitrust scrutiny. Jd. at 237, 116

S.Ct. 2116. :

The Supreme Court has never delineated the precise

boundaries of the exemption, and what guidance it has given as

to its application has come mostly in cases in which agreements

between an employer and a labor union were alleged to have

injured or eliminated a competitor in the employer’s business or

product market. In the face of such allegations, the Court has

largely permitted antitrust scrutiny in spite of any resulting

detriment to the labor policies favoring collective bargaining.

In the first case to deal squarely with the non-statutory

exemption, Allen Bradley Co. v. Local No. 3, International

Brotherhood of Electrical Workers, 325 U.S. 797, 65 S.Ct.

1533, 89 L.Ed. 1939 (1945), the New York City electrical

workers union negotiated a series of agreements in which local

manufacturers and contractors agreed to deal only with other

manufacturers and contractors that employed the union’s

members. Jd. at 799-800, 65 S.Ct. 1533. A non-local

manufacturer that was excluded from the market as a result

successfully sued under the antitrust laws, establishing that

these agreements were “but one element in a far larger program

in which contractors and manufacturers united with one another

to monopolize all the business in New York City, to bar all

other business men from that area, and to charge the public

prices above a competitive level.” Jd. at 809, 65 S.Ct. 1533.

Although the Court recognized that the union sought the

agreements out of “a desire to get and hold jobs for themselves

at good wages and under high working standards,” it held that

the non-statutory exemption-did not apply where unions

“combine with employers and with manufacturers of goods to

restrain competition in, and to monopolize the marketing of,

such goods.” /d. at 798, 65 S.Ct. 1533. |

Twenty years later, the Court considered two cases

dealing with the non-statutory exemption. Although the Court

again refused to apply the non-statutory exemption in the first,

United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct.

1585, 14 L. Ed. 2d 626 (1965), it did apply the exemption in

Local No. 189, Amalgamated Meat Cutters & Butcher

Workmen v. Jewel Tea Co., 381 U.S. 676, 85 S.Ct. 1607, 14

L.Ed.2d 626 (1965). In Pennington, a small coal mine operator

claimed that a miners union violated the antitrust laws by

agreeing with large coal mine companies that the union would

demand a higher wage scale from small coal mine operators in

an effort to drive the small mine operators from the market.

Echoing its decision in Allen Bradley, the Court held that while

“a union may make wage agreements with a multi-employer

bargaining unit and may in pursuance of its own union interests

seek to obtain the same terms from other employers” without

incurring antitrust liability, “a union forfeits its exemption from

the antitrust laws when it is clearly shown that it has agreed

with one set of employers to impose a certain wage scale on

other bargaining units.” Pennington, 381 U.S. at 665, 85 S.Ct.

1585.

The Court, however, reached a different result in Jewel

Tea, which involved a challenge to a collective bargaining

agreement between the butchers union and meat sellers in

Chicago, whereby the meat sellers agreed to limit the operation

of meat counters to certain hours. See Jewel Tea, 381 U.S. at

679-80, 85 S.Ct. 1607. The union sought the restriction not

only to cabin the hours in the workday but also to diminish the

threat posed to members’ job security by evening sales of

prepackaged meat and the nighttime use of unskilled labor. Jd.

at 682, 85 S.Ct. 1607. Jewel Tea was one of the meat sellers

that signed the agreement. It did so, however, only under

pressure from the union and then challenged the hours

restriction on antitrust grounds. Jewel Tea notably did not

allege that the hours restriction eliminated competition among

the meat sellers that made up the bargaining unit or that the

union sought the hours restriction from Jewel Tea at the behest

of other meat sellers. Jd. at 688, 85 S.Ct. 1607.

A majority of the Court agreed that the hours restriction

fell within the non-statytory exemption, but the Justices

disagreed as to the reason for applying the exemption. Justice

White, writing for himself and two other Justices, advocated

that the application ofthe non-statutory exemption should be

determined by balancing the “interests of union members”

served by the restraint against “its relative impact on the

product market.” /d. at 690 n. 5, 85 S.Ct. 1607. Applying that

test, Justice White held that the hours restriction was

so intimately related to wages, hours and

working conditions that the unions’ successful

attempt to obtain that provision through bona

fide, arm’s-length bargaining in pursuit of their

own labor union policies, and not at the behest

of or in combination with nonlabor groups, falls

within the protection of the national labor policy

and is therefore exempt from the Sherman Act.

Id. at 689-90, 85 S.Ct. 1607.2”

207

When confronted with allegations that agreements between

Concurring in Jewel Tea but dissenting in Pennington,

Justice Goldberg, writing for himself and two Justices, found

that no such balancing was necessary. Because federal labor

law obligates the union and employer to bargain in good faith

and permits unions to strike over those issues that relate to

workers’ wages, hours, or terms and conditions of employment,

Justice Goldberg found that it would “stultify the congressional

scheme” to expose collective bargaining agreements on these

so-called mandatory bargaining subjects to antitrust liability.

Id. at 712, 85 S.Ct. 1585. Therefore, according to Justice

Goldberg, all “collective bargaining activity concerning

mandatory subjects of bargaining under the [labor laws] is not

subject to the antitrust laws.” Jd. at 710, 85 S.Ct. 1585.

Another ten years later, in Connell Construction Co. v.

Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616,

95 S.Ct. 1830, 44 L. Ed. 2d 418 (1975), the Court held the non-

statutory exemption did not protect a union’s agreement with a

contractor that bound the contractor to deal only with

subcontractors that employed the union’s members. The

challenged agreement was not a collective bargaining

agreement, and the union did not represent the contractor’s

employees; rather, the contractor acceded to the agreement only

after the union picketed one of its facilities. Jd. at 619, 95 S.Ct.

1830. The Court refused to apply the exemption to this “kind

of direct restraint on the business market[, which] has

substantial anticompetitive effects, both actual and potential,

labor and employers damaged competition in the business or

product market, we have previously regarded Justice White’s

decision in Jewel Tea as setting forth the “classic formulation” of

the non-statutory exemption. See Local 210, Laborers’ Int’l Union

v. Labor Relations Div. Associated Gen. Contractors of Am., 844

F.2d 69, 79 (2d Cir.1988); Berman Enters. Inc. v. Local 333,

United Marine Div., Int'l Longshoremen’s Ass'n, 644 F.2d 930,

935 n. 8 (2d Cir.1981).

that would not follow naturally from the elimination of

competition over wages and working conditions.” /d. at 625,

95 S.Ct. 1830. ;

Contending that these cases establish the applicabie

boundaries of the non-statutory exemption to be applied in the

present case, Clarett argues that the NFL’s eligibility rules lack

all of the characteristics that led Justice White to apply the

exemption in Jewel Tea. Clarett, furthermore, maintains that the

boundaries of the exemption were properly identified in, and

thus we should follow, the Eighth Circuit’s decision in Mackey

v. National Football League, 543 F.2d 606 (8th Cir. 1976).

Mackey involved a challenge brought by NFL players to the

League’s so-called “Rozelle Rule,” which required NFL clubs

to compensate any club from which they hired away a player

whose contract had expired. /d. at 609. Presenting arguments

not dissimilar from those made in the present case, the players

in Mackey alleged that the Rozelle Rule constituted an unlawful

conspiracy amongst the NFL clubs to restrain players’ abilities

freely to contract their services. The NFL, for its part, asserted

that the Rozelle Rule was exempt from the antitrust laws by

virtue of its inclusion in the League’s collective bargaining

agreement with the players union. Noting that the Supreme

Court had to that point applied the non-statutory exemption

only in Jewel Tea, the Eighth Circuit gleaned from the Court’s

decisions, and Justice White’s opinion in Jewel Tea in

particular, that in order to fall within the non-statutory

exemption, a restraint must: 1) primarily affect only the parties

to the collective bargaining relationship, 2) concern a

mandatory subject of collective bargaining, and 3) be the

product of bona fide arm’s-length bargaining. Jd at 614.

Although the Eighth Circuit found that the Rozelle Rule

satisfied the first two prongs, it nonetheless refused to apply the

exemption after finding that the Rozelle Rule was not the

product of arm’s-length negotiations. /d. at 615-16. Noting that

the Rozelle Rule predated the advent of the collective

bargaining relationship between the NFL and its players union,

the Eighth Circuit found that the record lacked sufficient

evidence to conclude that the players union had received some

quid pro quo in exchange for including the Rule in the

collective bargaining agreement. /d. at 616. For that reason,

the Eighth Circuit held that the Rozelle Rule did not fall within

the non-statutory exemption, and the Rule was invalidated on

antitrust grounds. /d. at 621-22.

Relying on Mackey, the district court below held that

the non-statutory exemption provides no protection to the

NFL’s draft eligibility rules, because the eligibility rules fail to

satisfy any of the three Mackey factors. Clarett, 306 F. Supp.

2d at 397. Specifically, the district court found that the rules

exclude strangers to the bargaining relationship from entering

the draft, do not concern wages, hours or working conditions of

current NFL players, and were not the product of bona fide

arm’s-length negotiations during the process that culminated in

the current collective bargaining agreement. /d. at 395-97.

We, however, have never regarded the Eighth Circuit’s

test in Mackey as defining the appropriate limits of the non-

statutory exemption. See Local 210, Laborers’ Int'l Union, 844

F.2d at 80 n. 2 (declining to follow Mackey in favor of

balancing test articulated inJewel Tea); see also United States

Football League v. Nat’l Football League, 842 F.2d 1335, 1372

(2d Cir.1988) (recognizing Mackey is “not consistent with our

decision in Wood v. National Basketball Ass'n”). Moreover,

we disagree with the Eighth Circuit’s assumption in Mackey

that the Supreme Court’s decisions in Connell, Jewel Tea,

Pennington, and Allen Bradley dictate the appropriate

boundaries of the non-statutory exemption for cases in which

the only alleged anticompetitive effect of the challenged

restraint is on a labor market organized around a collective

bargaining relationship. Indeed, we have previously recognized

that these decisions are of limited assistance in determining

whether an athlete can challenge restraints on the market for

professional sports players imposed through a collective

bargaining process, because all “involved injuries to employers

who asserted that they were being excluded from competition in

the product market.”""* Wood v. Nat'l Basketball Ass'n, 809

F.2d 954, 963 (2d Cir.1987) (emphasis in original).2”

— Although Justice White in his opinion in Jewel Tea stated that

the plaintiff had “not allege[d] that it ha[d] been injured by the ~

elimination of competition among the other employers within the

unit with respect to marketing hours,” Jewel Ti ea, 381-U.S. at 688,

85 S.Ct. 1607, Justice Goldberg in his concurrence noted that it

was conceded on that record that the uniform hours restriction

challenged in that cases aided “small employers at the expense of

the large,” id. at 699, 85 S.Ct. 1607.

We are not the only circuit to have drawn this distinction. See,

e.g., Brown v. Pro Football, Inc., 50 F.3d 1041, 1056 (D.C.

Cir.1995), aff'd, 518 U.S. 231, 116 S.Ct. 2116, 135 L.Ed.2d 521

(1996) (“[T]}he nonstatutory labor exemption waives antitrust

liability for restraints on competition imposed through the

collective bargaining process, so long as such restraints operate

primarily in a labor market characterized by collective

bargaining.”); Mid-America Reg’l Bargaining Ass'n v. Will County

Carpenters Dist. Council, 675 F.2d 881, 893 (7th Cir.1982)

(“[Non-statutory exemption applies where] restraint ... alleged is

not a ‘direct restraint on the business market’ but rather a direct

restraint on the labor market, with only tangential effects on the

business market.”); Consol. Express, Inc. v. N.Y. Shipping Ass'n,

602 F.2d 494, 513 (3d Cir.1 979), vacated on other grounds, 448

U.S. 902, 100 S.Ct. 3040, 65 L.Ed.2d 1131 (1980) (“The term

nonstatutory exemption ... is a shorthand description of an

interpretation of the Sherman Act, making that statute inapplicable

to restraints imposed in the interest of lawful union monopoly

power in the labor market.”).

Clarett does not contend that the NFL’s draft eligibility

rules work to the disadvantage of the NFL’s competitors in the

market for professional football or in some manner protect the

NFL’s dominance in that market. Compare N. Am. Soccer

League v. Nat’! Football League, 670 F.2d 1249 (2d Cir.1982).

He challenges the eligibility rules only on the ground that they

are an unreasonable restraint upon the market for players’

services. See Clarett, 306 F.Supp.2d at 399. Thus, we need not

decide here whether the Mackey factors aptly characterize the

limits of the exemption in cases in which employers use

agreements with their unions to disadvantage their competitors

in the product or business market, because our cases have

counseled a decidedly different approach where, as here, the

plaintiff complains of a restraint upon a unionized labor market

characterized by a collective bargaining relationship with a

multi-employer bargaining unit. See Caldwell v. Am. Basketball

Ass'n, 66 F.3d 523 (2d Cir.1995); Nat’l Basketball Ass’n v.

Williams, 45 F.3d 684 (2d Cir.1995); Wood v. Nat'l Basketball

Ass’n, 809 F.2d 954 (2d Cir.1987). Moreover, as the discussion

below makes clear, the suggestion that the Mackey factors

provide the proper guideposts in this case simply does not

comport with the Supreme Court’s most recent treatment of the

non-statutory labor exemption in Brown v. Pro Football, Inc.,

518 U.S. 231, 116 S.Ct. 2116, 135 L. Ed. 2d 521 (1996).

Our decisions in Caldwell, Williams, and Wood all

involved players’ claims that the concerted action of a

professional sports league imposed a restraint upon the labor

market for players’ services and thus violated the antitrust laws.

In each case, however, we held that the non-statutory labor

exemption defeated the players’ claims. Our analysis in each

case was rooted in the observation that the relationships among

the defendant sports leagues and their players were governed by

collective bargaining agreements and thus were subject to the

carefully structured regime established by federal labor laws.

We reasoned that to permit antitrust suits against sports leagues

on the ground that their concerted action imposed a restraint

upon the labor market would seriously undermine many of the

policies embodied by these labor laws, including the

congressional policy favoring collective bargaining, the

bargaining parties’ freedom of contract, and the widespread use

of multi-employer bargaining units. Subsequent to our

decisions in this area, similar reasoning led the Supreme Court

in Brown v. Pro Football, Inc., 518 U.S. 231, 116 S.Ct. 2116,

135 L. Ed. 2d 521 (1996), to hold that the non-statutory

exemption protected the NFL’s unilateral implementation of

new salary caps for developmental squad players after its

collective bargaining agreement with the NFL players union

had expired and negotiations with the union over that proposal

reached an impasse. We need only retrace the path laid down

by these prior cases to reach the conclusion that Clarett’s

antitrust claims must fail.

The plaintiffin Wood, O. Leon Wood, was a star college

basketball player who, after being drafted by the Philadelphia

76ers, sued the NBA alleging that its policies regarding, inter

alia, the entry draft process and team salary caps constituted

unlawful agreements among horizontal competitors to eliminate

competition for college players.”!° Wood, 809 F.2d at 956-58.

All of the challenged policies, however, were included in a

collective bargaining agreement and memorandum of

understanding between the NBA and its players union. /d. at

710 The challenge to the NBA draft in Wood, as with the challenge

in Williams, discussed infra, did not include any claim against the

rules governing eligibility for the draft.

957-58. Because these agreements were the result of the

federally mandated bargaining process through which the union

and the NBA, in light of the unique economic imperatives of

professional basketball, negotiated a host of creative solutions

to settle their differences, we held that to permit Wood to

challenge particular aspects of their agreement on antitrust

grounds would “subvert fundamental principles of our federal

labor policy.” Jd. at 959.

Specifically, we found that Wood’s claim that the

NBA’s agreements prevented him from becoming a free agent

and negotiating directly with the teams for the best salary

contravened the principle of federal labor law that once a

majority of employees votes to unionize and elects a

representative, individual employees — whether in the

bargaining unit or not—no longer possess the right to negotiate

with the employer for the best deal possible. Jd. at 959-60

(citing 29 U.S.C. § 159(a)). Rather, the union representative is

charged with the responsibility of seeking the best overall deal

for employees, which often means that some employees or

prospective employees may fare worse than they would in a

competitive market free from restraints. Jd. We further rejected

Wood’s contention that the non-statutory exemption did not

preclude his challenge because he was not a member of the

union when the collective bargaining agreement became

effective, observing that new union members often find

themselves disadvantaged vis-a-vis more senior union members

and that collective bargaining units commonly disadvantage

employees outside of, or about to enter, the union. Jd. at 960.

We also reasoned that to allow Wood to cherry-pick the

particular policies with which he took issue would run counter

to the “freedom of contract” that labor law intends unions and

employers to have during the collective bargaining process,

because Wood could negate aspects of the “unique bundle of

compromises” struck between the NBA and its players on their

way to a peaceful and efficient resolution of their differences.

Id. at 961. Particularly because Wood challenged agreements

concerning mandatory subjects of bargaining, to which labor

law attaches a host of rights and obligations, we saw no place

for the application of the antitrust laws and found the non-

statutory exemption applicable. Jd. at 962.

Eight years later, in Williams, a class of professional

basketball players again brought an antitrust suit challenging,

inter alia, the NBA’s draft process and salary caps. Williams,

45 F.3d at 685-86. This time, however, the restraints

challenged by the players were not encompassed in any

effective agreement between the NBA and its players union,

because the collective bargaining agreement had expired. /d. at

686. The challenged policies were implemented unilaterally by

the NBA after negotiations with the players union on these

subjects reached an impasse. Jd. We nevertheless held that the

NBA’s conduct fell within the non-statutory exemption. /d. at

693. Foremost, we found that the players’ antitrust claims were

inconsistent with federal labor law because they imperiled the

legitimacy of multi-employer bargaining, “a process by which

employers band together to act as a single entity in bargaining

with acommon union.” /d. at 688. From the standpoint of our

labor and antitrust laws, we explained that such multi-employer

bargaining units are a long-accepted and commonplace means

of giving employers the tactical and practical advantages of

collective action. Jd. at 688-93. Moreover, in the context of

sports leagues, we observed that multi-employer bargaining

units serve the additional, important purpose of allowing the

teams to establish and demand uniformity in the rules necessary

for the proper functioning of the sport. Jd. at 689. Second, we

found thiat legality of conduct undertaken in the course of

negotiations over a collective bargaining agreement is an issue

committed to the specialized knowledge of the National Labor

Relations Board, for which federal labor law provides a “soup-

to-nuts array of rules and remedies.” Jd at 693. Because

permitting courts to police that same conduct under the

auspices of the antitrust laws would disrupt that remedial

scheme, we held that the non-statutory exemption was

applicable. /d. at 693.

That same year, in Caldwell, we heard the appeal of Joe

L. Caldwell, a former professional basketball player who after

four successful seasons of play was suspended from his team in

1974 and never returned to the game. Caldwell, 66 F.3d at 525- .

26. While a basketball player, Caldwell represented the players

in labor negotiations with the league and claimed to have

incurred the scorn of his league, the American Basketball

Association (“ABA”), as a result. Jd. at 526. He alleged that

the teams consequently agreed among themselves, in violation

of the antitrust laws, that he should be fired and then blacklisted

from professional play. Jd. Despite the district court’s finding

that the case could “be entirely resolved without any reference

whatsoever to the” collective bargaining agreement between the

ABA and its players union, id. at 529 n. 1, we held that the non-

statutory exemption defeated Caldwell’s claims, id. at 527.

In Caldwell, our analysis began with the observation

that “[t]he inception of a collective bargaining relationship

between employees and employers irrevocably alters the

governing legal regime.” /d. at 527-28 (quoting Brown v. Pro

Football, Inc., 50 F.3d 1041, 1054 (D.C. Cir.1995), aff'd 518

U.S. 231, 116 S.Ct. 2116, 135 L. Ed .2d 521 (1996)). We found

that as a consequence of the collective bargaining relationship

between the ABA and its players union, Caldwell’s claims,

insofar as they concerned the “circumstances under which an

employer may discharge or refuse to hire an employee,”

involved a mandatory bargaining subject. Jd. at 529. Thus,

federal labor law afforded Caldwell a host of administrative and

judicial remedies to contest the parties’ agreements on the

subject, as well as his firing and any team’s refusal to rehire

him. Jd. Drawing upon our discussion of multi-employer

bargaining units in Williams, we then observed that the legality

vel non of his treatment did not become a question of antitrust

law simply because the “employers acted jointly in refusing

employment.” Jd. Because such issues are remediable under

labor law, we concluded that the non-statutory exemption

applied.

The following year, in Brown, the Supreme Court was

presented with facts similar to Williams, and eight Justices

agreed that the non-statutory exemption precludes antitrust

claims against a professional sports league for unilaterally

setting policy with respect to mandatory bargaining subjects

after negotiations with the players union over those subjects

reach impasse. Brown, 518 U.S. at 240-42, 116 S.Ct. 2116.

There, a class of professional football players challenged the

NFL’s unilateral institution of a policy that permitted each team

to establish a new squad of developmental players and capped

those players’ weekly salaries after negotiations with the

players union over that proposal became deadlocked. /d. at

234-35, 116 S.Ct. 2116. Approaching the issue largely as a

“matter of logic,” id. at 237, 116 S.Ct. 2116, the Court found

that to permit antitrust liability in such a case would call into

question a great deal of conduct, such as multi-employer

bargaining, that federal labor policy promotes and for which

labor law provides an array of rules and remedies, id. at 237-42,

116 S.Ct. 2116. The Court held that the non-statutory labor

exemption necessarily applied not only to protect such labor

policies but also to prevent “antitrust courts” from usurping the

NLRB’s responsibility for policing the collective bargaining

process. Id. at 240- 42, 116 S.Ct. 2116.

The Court also rejected a number of potential limits on

the exemption that were raised by the players and their

supporters. First, the Court held that the exemption was not so

narrow as to protect only agreements between the parties that

are embodied in an existing collective bargaining agreement.

Id. at 243-44, 116 S.Ct. 2116. Second, in finding that the

League’s post-impasse action was protected by the exemption,

the Court dismissed the suggestion that the exemption should

insulate the concerted action of employers only up to the point

at which negotiations reach impasse or a “reasonable time”

thereafter. Jd. at 244-47, 116 S.Ct. 2116. Third, the Court

rejected the notion that courts in applying the exemption could

distinguish between bargaining “tactics,” which the players

argued should be exempt, and unilaterally imposed “terms.” Jd.

at 247-48, 116 S.Ct. 2116. Finally, the Court refused the

players’ contention that the labor of professional sports players

was unique and that the market for players’ services therefore

should be treated differently than other organized labor markets

for purposes of the non-statutory exemption. /d. at 248-49, 116

S.Ct. 2116.

Although the Court in Brown held that the non-statutory

exemption applied, it left the precise contours of the exemption

undefined. /d. at 250, 116 S.Ct. 2116. In so doing, the Court

found it unnecessary to embrace, and indeed expressed some

reservations about, the broader holding of the court of appeals

that the non-statutory exemption “waiv{[es] antitrust liability for

restraints on competition imposed through the collective-

bargaining process, so long as such restraints operate primarily

in a labor market characterized by collective bargaining.” Jd. at

235, 116 S.Ct. 2116.

Clarett argues that his case differs in material respects

from Brown, but he does not argue, nor do we find, that the

Supreme Court’s treatment of the non-statutory exemption in

that case gives reason to doubt the authority of our prior

decisions in Caldwell, Williams, and Wood. Because we find

that our prior decisions in this area fully comport — in ap

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